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Say goodbye to the Coffee Coolatta
France's PSA agrees €2.2bn deal for Opel
21 March 2017, 09:20 | Jan Cross
Peugeot owner expected to buy Vauxhall and Opel operations
But the Brexit vote scuttled that opportunity, and GM analysts feared the losses would continue.
Europe's burden on GM's balance sheet will now be confined to pensions, leaving Peugeot owner PSA with the task of fixing the troubled Opel brand and turning around a business that's lost about $9 billion since 2009.
But GM will be liable for much of Opel's pensions obligations, estimated at as much as $10 billion by analysts, which had been a major sticking point during negotiations. With $8 billion remaining to buy back, from a total of $14 billion now authorized, Stevens said that GM would be able to buy back $5 billion in 2017, versus a previously expected $3 billion. The deal will continue efforts to shed underperforming assets and will free up about $2bn in cash to use for share buybacks, according to the statement. Opel provided one-tenth of GM's global sales-but represented 18 percent of its workforce.
"In many markets, customers will consider German brands over French brands", he says, calling any potential cannibalization between Peugeot and Opel quite limited.
GM's vehicle portfolio is highly car-centric in Europe, while buyers' preference is for more SUVs and crossovers.
PSA Group CEO Carlos Tavares commented on the deal: "We're confident that the Opel-Vauxhall turnaround will significantly accelerate with our support".
Already, GM had pulled out of the Russian market, ended vehicle production in Australia, and taken Chevrolet out of Europe. These are the U.S., China, and the EU GM chose to drop out of Europe, as, after years of losses, it could not fix its problems there. It still sells some higher-end Chevy sports cars there, but in small numbers. These were two brands and now they're under a single roof.
GM missed its break-even target for Europe previous year due to currency issues related to the United Kingdom's "Brexit" vote to leave the European Union. GM remains the No. 1 or No. 2 auto company in the world's three other major markets: China, South America and North America, which generated the lion's share of its record $12.5 billion operating profit in 2016.
Now he will have to deliver on the promises he made to French and German politicians and unions to build a European champion that is better equipped to ride out the market's next downturn.
He is betting he can steer a successful turnaround at GM's European operations, similar to the project he put in place at Peugeot about three years ago. "Obviously we have our own homework to do and we're going to do that in a very single-minded way and therefore we are very positive about the future".
Experts have frequently said Opel has not been successful in reducing overcapacity at its factories.
"Our planning teams are already working on that", Tavares said when asked about the model. "We do not need to shut down plants".
On Monday both companies said that the deal was expected to generate annual savings of €1.7bn by 2026, with Opel generating an operating profit margin of 2 per cent by 2020 and 6 per cent by 2026.
Peugeot's net profit increased by 79 per cent in 2016 and there are hopes that it can also help turn Opel around - although many believe that may be achieved by restructuring and cutting non-French jobs.
PSA reiterated pledges to run Opel as a distinct German subsidiary and honor existing job guarantees to unions, which tend to cover production plans for existing models.
"Without Brexit, we would have reached the breakeven goal" to the European leg of the business, GM chairman and chief executive Mary Barra reported Monday.
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