PSA emerging as new global auto giant

A landmark move by France’s PSA Peugeot Citroen to purchase the European business of US auto giant General Motors (GM) is expected to turn it into a new global player to challenge EU market leader Volkswagen.    

The move – that would involve purchasing Opel and its British Vauxhall brand from GM – was warmly welcomed by investors. PSA shares rose by as much as 5.2 percent when the planned purchase was announced.

PSA Chief Executive Carlos Tavares told reporters in Paris that his group had serious plans to specifically turnaround GM’s loss-making European offshoot – Opel. The company had recently recorded its 16th consecutive full-year loss, Reuters reported.

“We’re confident that the Opel-Vauxhall turnaround will significantly accelerate with our support,” he said.

By acquiring Opel, PSA leapfrogs French rival Renault to become Europe’s second-ranked carmaker by sales, with a 16 percent market share to Volkswagen’s 24 percent, Reuters reported.

For GM, bidding farewell to the Opel-Vauxhall business after 90 years could bolster its overall profitability.

The move came after the US giant lost money every year in Europe since 1999 – $257 million pretax last year and about $20 billion in all, the media reported.

The deal which is expected to have a value of $2.2 billion is expected to close by the end of the year, pending regulatory approvals.

GM top executives have been quoted as telling the media that the company had decided to sell Opel-Vauxhall due to Europe’s changing geo-political and regulatory climate demands.

They also said the company saw a greater need to focus on North America, China and emerging technologies such as autonomous vehicles.

GM President Dan Ammann said at a news conference Monday in Paris that the European automotive market had become so different from GM’s other major regions that only 20 percent of the vehicles in Opel’s future portfolio would have been shared with the rest of GM. That means a company such as PSA is in a better position to provide the necessary scale, Ammann explained.

“We believe this is the beginning of a new era of achievement for Opel/Vauxhall as well as a bold and fundamental commitment to GM’s own future of profitable growth and success,” GM CEO Mary Barra was quoted as telling the media.