PSA targets Opel turnaround as GM exits Europe

Mon Mar 6, 2017 1:21pm EST
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Laurence Frost and Edward Taylor

PARIS/FRANKFURT (Reuters) - France's PSA Group (PEUP.PA: Quote) plans to buy Opel from General Motors (GM.N: Quote) in a deal valuing the business at 2.2 billion euros ($2.3 billion), creating a new European car company to challenge market leader Volkswagen (VOWG_p.DE: Quote).

The maker of Peugeot and Citroen cars vowed to return Opel and its British Vauxhall brand to profit, targeting an operating margin of 2 percent within three years and 6 percent by 2026 underpinned by 1.7 billion euros in cost savings.

The deal seals GM's exit from Europe and ends a relationship dating back to the 1920s.

GM will receive 650 million euros in cash and 670 million euros in PSA share warrants for the Opel manufacturing business. The Paris-based carmaker and BNP Paribas (BNPP.PA: Quote) will pay an additional 900 million euros for Opel's financing arm, to be operated jointly and consolidated by the French bank.

GM will take a non-cash charge of $4 billion to $4.5 billion on the deal when it closes in late 2017. The company said the transaction would cut its cash balance requirement by $2 billion, allowing it to accelerate share repurchases.

The company's shares were down 1.4 percent in midday trading in New York.

PSA shares jumped as much as 5.2 percent after Chief Executive Officer Carlos Tavares said GM's European operation could be turned around using lessons from the French group's own recovery. Opel recently recorded its 16th consecutive full-year loss.

"We're confident that the Opel-Vauxhall turnaround will significantly accelerate with our support," Tavares said.   Continued...

Carlos Tavares (L), Chairman of the Managing Board of French carmaker PSA Peugeot Citroen, shakes hands with Mary Barra, chairwoman and CEO of General Motors, before a news conference in Paris, France, March 6, 2017. REUTERS REUTERS/Christian Hartmann