General Motors could be about to cut its loses and sell its European business to PSA Peugeot Citroen.
It has been confirmed by both sides that the US carmaker is in advanced talks with the French firm about off-loading loss-making German brand Opel, and Vauxhall which is based in Britain.
It was not clear what price GM might want for the European business, or what structure a deal could take.
A combined group would have a more than 16 percent share of European car sales. Greater scale would help in the battle with market leader Volkswagen, which has 24 percent.
Peugeot and Citroen would gain savings from improved operating efficiency as well as access to Opel’s electric vehicle technology but also its costly German factories.
A statement on General Motors and PSA Group strategic initiatives can be found here: https://t.co/j6O6lIKfuN— Opel Group News (@OpelGroup) February 14, 2017
Any deal would have to overcome financial, industrial and political obstacles. Germany’s industrial union IG Metall immediately fired a warning shot saying that if the companies were discussing the sale of Opel without the union’s involvement that would be an “an unprecedented breach of all German and European co-determination rights”.
German Economy Minister Brigitte Zypries said it was totally unacceptable that talks about a deal have taken place without German works councils or local government being consulted.
Long history of losses
GM Europe has been a drag on the automaker’s global profitability since 1999, the last year Opel and Vauxhall recorded a net profit.
GM restructured its European operations over the past six years, shutting Opel factories in Belgium and Germany and withdrawing the Saab and Chevrolet brands from sale. Still, GM Europe failed to break even in 2016.
Selling Opel would free up GM to invest more to develop vehicles for the North American and Chinese markets, where it makes nearly all of its automotive profits, as well as to expand new businesses.
For GM CEO Mary Barra, ditching the struggling Opel is the next step to dismantling the firm’s mega-volume strategy: https://t.co/ZKFebdAH3r— Wall Street Journal (@WSJ) February 14, 2017