France’s PSA Peugeot Citroen Group has announced that it is to buy Adam Opel AG, the General Motors company which also controls Vauxhall, through its GM Automotive UK Ltd subsidiary. The deal is costing Peugeot around $2.3 billion on paper, but in reality its is far better deal than that as the cash element of the deal is only $690 million, plus $490 million for a 50 percent share of Opel Bank GmbH, the company’s finance division, which is being acquired in league with the French bank BNP Paribas. There are some PSA warrants that could be converted into shares in 2022 but PSA is also going to benefit from savings that derive from a deal between Opel and PSA which will mean $320 million a year for the next three years, plus further cost cuts which are due by 2020. PSA boss Carlos Tavares says he is going to make further savings after 2020 as the two groups are integrated. The deal means that PSA moves ahead of Renault to take second place to Volkswagen in the European market.
The departure of GM from Europe has been made for the simple reason that the US car company hasn’t made any money in Europe since 1999 and most of the time has had to swallow losses which are estimated to be in excess of $20 billion. The deal will include GM taking a charge of at least $4 billion, to clean up the debt.
What is interesting is that PSA boss Carlos Tavares has said that he wants to take the company back to America, in order to become a truly global company. It may be that he will do this using the Opel brand, which is not in the US market at all but will benefit from the good reputation that German cars firms enjoy in the US.
The future of the Vauxhall brand remains to be seen. The cars are virtually identical to Opels and redundancies in Britain cost about a third of what is required in Germany. Vauxhall employs 4,500 people at its two plants in Ellesmere Port and in Luton.
Whether there is any impact on PSA’s motorsport activities remains to be seen, but this is not likely to be a priority as the company has other things to worry about for now. Having said that, Tavares, who used to be at Renault, is a petrol head, who has raced himself, competing in machinery up to Formula 3000 level.