French brands buy Opel

French car group PSA will purchase General Motors’ European brands, Opel and Vauxhall. The companies confirmed the deal this afternoon.

The parent brand of Peugeot and Citroen, PSA will purchase the GM brands and GM Financial’s European operations in a deal which values the entities at €1.3b and €0.9b respectively. The deal will be completed in the last quarter of 2017.

European sources have suggested PSA will pay around half of the sum (approximately $A3.1b) in cash and the rest in shares. The deal catapults PSA to the number two position in Europe behind Volkswagen with around 17% market share.

Holden says Aussie new car buyers and its existing model cycle-plan will not be affected.

The Australian GM subsidiary company issued a brief statement this afternoon. In full it reads: “Holden and Opel have had close ties for many years and delivered fantastic vehicles to Australian customers, including the current all-new Astra and the next-generation Commodore due in 2018.

“The good news is these product programs are not affected at all. We will continue to work closely with Opel and GM to deliver our vehicle plans with excellence and precision. This includes future, new right-hand-drive SUVs like the Equinox and Acadia that were engineered specifically for right-hand drive markets.”

In the longer term, however, it’s not clear how the deal will change the face of local GM product. Certainly, the suggestion is that it could align local products more closely to Chinese or US market line-ups.

On the main deal, itself, Carlos Tavares, chairman of the Managing Board of PSA stated: “We are proud to join forces with Opel/Vauxhall and are deeply committed to continuing to develop this great company and accelerating its turnaround.”

“We intend to manage PSA and Opel/Vauxhall capitalizing 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,” he stated.

Tavares said he wanted to create a “European champion” and stated the existing Opel and Vauxhall management had the trust of the new organisation. He said the current positioning of the three brands (Opel, Peugeot and Citroen) were “clear”.

GM executives including chairman and chief executive officer, Mary Barra, issued similarly upbeat statements.

“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”, she said.

“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,” Barra stated.

PSA’s statement suggests the transaction will “allow substantial economies of scale and synergies in purchasing, manufacturing and R&D”.

The company says it will realise “synergies” [savings and upside benefits] of €1.7b by 2026 – most of which will be delivered by 2020, it claims. Purchasing will be the key driver of savings, PSA says.

PSA execs also stated the timing of a number of vehicles’ shift to PSA platforms would also accelerate savings.

GM Financial’s European operations will be folded into a newly formed 50%/50% joint venture between PSA and BNP Paribas.

Barra said Opel and Vauxhall had played a significant role in GM since the 1920s. She said the decision was “difficult”. But she stated the Brexit, customer preferences and other geo-political factors impacted on the decision.

GM execs also highlighted the “divergence” between European and other key GM markets model preferences was another factor.

Barra also stated PSA/GM cooperation on three SUV and light commercial vehicles helped shape the deal.

Barra confirmed GM and PSA expected to collaborate in the further deployment of electrification technologies and that existing supply agreements for “Holden and certain Buick models” will continue.

PSA may “potentially source” long-term supply of fuel cell systems from the GM/Honda joint venture, she stated.

In a teleconference this evening, Opel boss, Karl-Thomas Neumann stated: “It has been an emotional day for all of us -- it is 88 years we have been part of General Motors.

“Crossland-X and Grandland-X clearly demonstrate the two teams can work together very well… And it’s perfectly possible to build a true Opel and Vauxhall on a joint PSA platform…

He stated it was “key” to continue to supply vehicles to both Holden and Buick to “maximize the capacity of our factories”.

He stated his initial discussions with PSA boss Tavares has been “motivating and positive”.