Peugeot to reach deal to buy Opel brand from General Motors

Business Sunday 05/March/2017 14:39 PM
By: Times News Service
Peugeot to reach deal to buy Opel brand from General Motors

Paris: PSA Group and General Motors Co. are set to announce on Monday the purchase of the Opel brand by the French company, creating the region’s second-largest automaker and allowing GM to exit the European market, according to people familiar with the matter.
The two carmakers, which sent an invitation for a joint press conference in Paris on Monday, have reached a framework agreement to complete the deal, according to people familiar with the matter, who asked not to be identified because negotiations are private. While final talks on remaining details of the transaction are ongoing, PSA’s board signed off on the transaction on Friday, the people said. Spokesmen for PSA and Opel declined to comment.
One of the key negotiating points has been how PSA can achieve about 2 billion euros ($2.1 billion) in savings from a deal, said one person. These would come largely from potential future capacity reductions as well as savings from joint purchasing, sharing more parts and lowering overhead costs, the person said.
PSA and GM are also discussing the French carmaker’s ability to sell Opel vehicles globally and the U.S. company’s right to bring Chevrolet-branded models to Europe down the line, two people said.
PSA Chief Executive Officer Carlos Tavares plans to revive GM’s unprofitable Opel and Vauxhall brands with a restructuring similar to his project that brought the maker of Peugeot and Citroen cars back from the brink over the past three years. Opel, based near Frankfurt, could in turn serve as a growth driver with potential for expansion beyond its home region, a role that was limited under GM’s ownership, Tavares said last week.
Sales volume is critical in Europe’s largely saturated mass-market segment, and adding GM’s roughly 1.2 million in annual deliveries in the region would help PSA spread the cost of developing new cars and engines across a larger number of vehicles.
Another issue in the talks has been how GM and PSA will manage the pension plan for Opel retirees, people familiar with the discussions have said. The program is underfunded by about $9 billion, according to data compiled by Bloomberg. Other complex questions to resolve include licensing fees for technology used in Opel cars and plans to cut production capacity.
To build support for the deal, PSA executives have been touring Europe to meet with labor leaders and politicians and assure them that Opel’s workers and production sites will be protected. France and Germany have emphasized the importance of preserving jobs and plants in both countries, and called on PSA to translate future growth into long-term employment security.