GM retreats from Europe with deal

By shedding the bulk of its European operations, General Motors Co. is getting rid of a perennial money drain and gaining cash that it can use to reward shareholders and invest in technology such as electric cars and ride hailing.

The Detroit automaker also indicated that it may pull out of more unprofitable markets in the future.

GM sold its European Opel and Vauxhall brands Monday to French carmaker PSA Group for roughly $2.33 billion, retreating from the world’s third-largest auto market after almost two decades of futile efforts to make money there. The brands have lost $20 billion in the fiercely competitive region since last making a full-year profit in 1999.

“I think they’re ready to cut their losses and move on,” Morningstar analyst David Whiston said. “They’d rather take their time and money and spend it elsewhere on something that has a better return.”

The sale, expected to close by the end of the year, also includes GM’s European auto financing arm, which goes to a joint venture between PSA and French bank BNP Paribas. GM has to keep $6.5 billion in unfunded pension obligations, but it unloads any future losses and about $1 billion per year in capital expenditures on new products.

Chief Financial Officer Chuck Stevens told reporters that the sale also means GM has to keep only $18 billion on hand to weather an economic downturn, rather than $20 billion. That $2 billion will go to speed up a company commitment to buy back $8 billion in stock. GM could repurchase as much as $5 billion this year.

The sale also was influenced by stronger European clean-air regulations that will require significant spending on electric-car development, as well as currency issues caused by Britain’s exit from the European Union, GM said.