General Motors and the PSA Group have announced an agreement under which the former’s Opel/Vauxhall subsidiary and GM Financial’s European operations will join the PSA Group in transactions valued at €1,3-billion (about R18-billion) and €0,9-billion (around R12,4-billion), respectively.
The PSA Group – which owns Peugeot, Citroën and DS Automobiles – said the move would make it the second-largest automotive company in Europe, overtaking Renault, with a 17% market share.
“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 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 capitalising on their respective brand identities. Having already created together winning products for the European market, we know that Opel/Vauxhall is the right partner. We see this as a natural extension of our relationship and are eager to take it to the next level.
“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 Tavares.
GM chairperson and chief executive officer Mary Barra said the transaction would build on the “success of the prior alliance”.
“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 Barra.
“For GM, this represents another major step in the ongoing work that is driving our improved performance and accelerating our momentum. We are reshaping our company and delivering consistent, record results for our owners through disciplined capital allocation to our higher-return investments in our core automotive business and in new technologies that are enabling us to lead the future of personal mobility.
“We believe this new chapter puts Opel and Vauxhall in an even stronger position for the long term and we look forward to our participation in the future success and strong value-creation potential of PSA through our economic interest and continued collaboration on current and exciting new projects,” Barra added.
A PSA statement said the transaction would allow “substantial economies of scale” and synergies in purchasing, manufacturing and R&D. Annual synergies of €1,7-billion are expected by 2026, said PSA, of which a significant part is expected to be delivered by 2020, accelerating Opel/Vauxhall’s turnaround.
Leveraging the partnership with GM, PSA says it expects Opel/Vauxhall to reach a recurring operating margin of 2% by 2020 and 6% by 2026, and to generate a positive operational free cash flow by 2020.
PSA added that GM would participate in the “future success of the combined entity” through its ownership of warrants to purchase shares of PSA.
“GM and PSA also expect to collaborate in the further deployment of electrification technologies and existing supply agreements for Holden and certain Buick models will continue, and PSA may potentially source long-term supply of fuel cell systems from the GM/Honda joint venture,” the statement concluded.
