GM sheds Europe’s Opel, Vauxhall in $2.2B deal
General Motors will sell its underperforming European operations to France’s PSA Group in a deal valued at $2.2 billion, the companies announced Monday.
The deal will make PSA, which already has the Peugeot and Citroen brands, Europe’s secondlargest automaker behind Volkswagen. It will pick up GM’s Vauxhall and Opel nameplates, which together produced about $1.8 billion in revenue last year. With the addition, PSA will have a market share of 17%, the companies said.
“For GM, this represents another major step in the ongoing work that is driving our improved performance and accelerating our momentum,” GM CEO Mary Barra said in a statement.
It also relieves GM of longstanding problems when it comes to the profitability of its European operations at a time when the U.S. and China, the world’s two largest auto markets, show more promise when it comes to generating higher-profit auto sales.
GM said it would take a charge of $4 billion to $4.5 billion, primarily in cash, in connection with the transaction. Additionally, most of Opel’s European Union and United Kingdom pension plans, funded and unfunded, will remain GM’s responsibility.
The announcement said the deal would free up approximately $2 billion, which GM said would be used to accelerate buybacks of the company’s shares.
Subject to regulatory approvals, the transaction is expected to close before the end of 2017.
It is unlikely that the sale was an easy decision for GM, based in Detroit. GM has long prided itself on its reach to all major automotive markets around the globe. Taking major brands targeting the European market off its map marks another ego blow to a company that for decades was the world’s largest automaker. Other automakers such as VW and Toyota have since eclipsed it.
These days, it’s higher profits, not the amount produced, that carries cache with investors.