GM’s Opel and PSA Group in advanced discussions on merger

February 15, 2017

General Motors (GM) and PSA Group (Peugeot Citroën) have both confirmed they are in advanced discussions for GM to sell its European operation to PSA, which would mean GM exiting the European market. The move is aimed at improving the unit’s profitability and operational efficiency after Opel failed to reach its 2016 target of achieving profitability for the first time since 1999. Last week, it announced a $257m loss (€243m). 

The deal allows PSA to boost its scale to compete with much larger rival groups, including Volkswagen and Hyundai Motor, and as other European players increase their ties, including French rival Renault’s potential merger with Nissan. 

A combined PSA-Opel would give the volume brands the second-largest share of the European passenger car market, at 16.3%, behind Volkswagen’s dominant 24.1%, based on 2016 data. This would mean it would leapfrog French rival Renault’s 2016 market share of 10.1%. 

It also allows PSA to gain access to Germany-based Opel’s engineering, including their electric car technology, as well as to make savings from joint purchasing. 

For GM, the move would mean a clean exit from the European market, removing a black mark from its balance sheet, and allow it to focus on investing and developing vehicles for its key markets in North America and China – where almost all its profits are made. 

It would also help GM shoulder the vastly mounting costs of competing in the emerging automotive markets of ride services, autonomous vehicles and connected commerce, by focussing resources on its main profit engines. 

 A deal may be announced within days, sources told Reuters, but both parties stress: ‘There can be no assurance that an agreement will be reached.

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