GM sells Opel and Vauxhall to PSA Group

US-based automaker General Motors (GM) today announced plans to sell off its 'Opel' and 'Vauxhall' subsidiaries.

GM sold its Vauxhall and Opel brands for 1.3 billion Euro. Image courtesy of PSA Group
GM sold its Vauxhall and Opel brands for €1.3bn – image courtesy of PSA Group.

These two brands, present in Germany and the UK respectively, represented much of the company’s European holdings.

Together, they amounted to almost 1.2 million vehicles sold last year and generated $18.7bn in revenue, accounting for approximately 11% of GM’s total.

They will be sold to French automotive company PSA Group, owner of brands such as Peugeot and Citroen, for a total of €1.3bn.

According to PSA Group, the deal, once complete would make the company the second largest automaker in Europe, accounting for 17% of total market share.

As well, in a separate but linked sale, PSA Group will also buy GM Financial’s European operations for a price tag of €0.9bn.

This deal to buy the European operations of GM Financial was made possible with funding from BNP Paribas, who will manage the division jointly with PSA Group.

PSA believes that through manufacturing synergies with its existing operations, it can reduce costs and increase profits for the underperforming Opel and Vauxhall brands. Moreover, the company believes the two brands can begin to generate a “positive operational free cash flow” by as early as 2020.

“We are proud to join forces with Opel/Vauxhall and are deeply committed to continuing to develop this great company and accelerating its turnaround,” said Carlos Tavares, chairman of the managing board of PSA.

“We are confident that the Opel/Vauxhall turnaround will significantly accelerate with our support while respecting the commitments made by GM to the Opel/Vauxhall employees.”

GM divests from Europe

The sale of Opel and Vauxhall represents a move away from European car manufacturing by GM.

Following this, GM appears to be doubling down on its sales within its core market, the US, where it hopes to avoid the same mistakes that led it to a government-managed bankruptcy in 2009.

Moreover, the European operations of GM had been running at a net loss since 1999, making them an easy candidate for sale.

Read out in-depth article here, including insight from Dr Steven Barr, managing director of the Hennik Edge consultancy.