GM weighs leaving Europe by selling its Opel division
FRANKFURT, Germany — General Motors floated the possibility on Tuesday that it could exit the large but troubled European market by selling its chronically unprofitable Opel unit to the French maker of Peugeot and Citroen cars.
The potential deal would create Europe’s second-largest automaker, challenging the market leader Volkswagen, which is vulnerable because of an emissions scandal.
For General Motors, a sale would free it from persistent losses in Europe and help fulfill pledges by its chief executive to improve overall profit margins and increase returns to shareholders.
At the same time that the company has been struggling in the European market, it has been become increasingly reliant on China and its core North American market. More losses in Europe could undercut its ability to invest in those more lucrative regions, as well as fund new ventures into autonomous vehicles and mobility services.
“While GM has ambitious long-term plans for Europe, we currently see the business as mediocre at best,” Brian Johnson, an analyst with Barclays, wrote on Tuesday. “Why not sell now, when Europe is steadier, versus trying to sell at a time when the market is in a downturn.”
Still, an agreement, between GM and PSA Group in France, would also link two of Europe’s weakest carmakers, which have more production capacity than they need and few products able to compete in the lucrative luxury market.
PSA is the European Union’s third-biggest automaker, with 9.9 percent of the market in 2016, according to the European Automobile Manufacturers Association. The purchase of Opel, which holds 6.7 percent of the market, would help the company vault past Renault into second place.
GM and PSA confirmed the talks, but they cautioned that “there can be no assurance that an agreement will be reached.”
Indeed, a previous deal to sell Opel to a group including a Russian bank fell apart in 2009.