General Motors confirmed on Monday that it has reached an agreement to sell its struggling European division Opel to French auto giant PSA Group, the parent of French brands Citroën, DS and Peugeot.
The deal, which is valued at 2.2 billion euros (approximately $2.33 billion), will see PSA trail only the Volkswagen Group for size among European automakers, with the combined market share coming in at approximately 17 percent. Combined deliveries for PSA and Opel totaled 4.3 million vehicles last year. The figures include those of Vauxhall which Opel operates under in the United Kingdom.
Under the agreement, PSA will pay 1.3 billion euros for the Opel and Vauxhall brands and 0.9 billion for the European division of the GM Financial lending unit. The latter is to be jointly owned with French bank BNP Paribas. GM will still be responsible for existing pension obligations for Opel’s staff which is estimated at approximately 3 billion euros.
PSA Peugeot Citroën logo
Following its bankruptcy late last decade, GM came close to selling Opel, which it has owned since 1931. Instead, the automaker in 2012 started collaborating with PSA on a number of projects and at one point was close to forming an alliance but the deal never proceeded. The two currently share manufacturing facilities and technologies, including whole vehicle platforms.
Opel has lost almost $20 billion over the past two decades and was targeted to finally break even in 2016 but was set back by currency fluctuations due to Brexit. Opel ended up losing $257 million in 2016—still a major improvement on the $813 million it lost the previous year.
PSA, which is backed by the French and Chinese (through a stake owned by state-owned Chinese automaker Dongfeng) governments, sees an opportunity to turn around Opel. The deal is expected to generate annual savings of 1.7 billion euros by 2026 via synergies such as shared R&D, manufacturing and procurement.
The man tasked with the turnaround is PSA CEO Carlos Tavares. He only joined PSA in 2014 and in short time, albeit with help from the French government and Dongfeng, turned a loss-making company into a profitable one. He now plans to do the same at Opel. Crucially, he aims to maintain Opel’s German identity and is unlikely to close any plants in the immediate term.
“We are proud to join forces with Opel/Vauxhall and are deeply committed to continuing to develop this great company and accelerating its turnaround,” Tavares said in a statement. “We respect all that Opel/Vauxhall’s talented people have achieved as well as the company’s fine brands and strong heritage—we intend to manage PSA and Opel/Vauxhall capitalizing on their respective brand identities.”
GM won’t be completely cutting its ties with Opel, especially considering all of the intellectual property involved. GM also has warrants to purchase shares of PSA. In a statement, GM said it expects to collaborate with PSA in the further deployment of vehicle electrification technologies, including hydrogen fuel cell tech, in addition to existing supply agreements for certain Holden and Buick models will continue. The new Insignia shown above, for example, will be sold by GM’s Holden unit as the next Commodore. A version of it will also be sold as the next Buick Regal.