Car manufacturers General Motors and the PSA Group, which has the Peugeot, Citroen and the DS brands under its umbrella have agreed to a deal where PSA Group will be purchasing the Opel and the Vauxhall brands from GM for €1.3 billion. This will enable PSA Group to become the second largest car manufacturer in Europe, with a market share of 17 per cent after the Volkswagen Group. The PSA Group also purchased GM Financial's Europe operations in partnership with BNP Paribas for €0.9 billion. The total cost incurred by the PSA Group was €2.2 billion or Rs. 15,617 crore.
"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," said Carlos Tavares, chairman of the Managing Board of PSA.
(Opel/Vauxhall will be able to us GM intellectual property licenses until all the models convert to PSA platforms)The biggest advantage of this transaction will be the increase in economies of scale and the synergy of purchasing, manufacturing and research and development. Both the companies expect annual synergies of €1.7 billion by the year 2026. PSA believes that Opel and Vauxhall should reach a recurring operating margin of at least two per cent by 2020 and six per cent by 2026. The companies also believe that this buy-out should start generating positive cash flow by 2020 as well. (Opel lost close to £200 million in 2016).
"We are very pleased that together, GM, our valued colleagues at Opel/Vauxhall and PSA have created a new opportunity to enhance the long-term performance of our respective companies by building on the success of our prior alliance", said Mary T. Barra, GM chairman and chief executive officer.
Opel and Vauxhall will be have the benefit of using and applying intellectual property licenses from GM till the time the vehicles from these two stables progressively start using platforms from the PSA Group over the next few years.
