Published: Sun, March 05, 2017
Markets | By Lucia Cruz

Peugeot poised to buy GM's Opel, creating European vehicle giant

Peugeot poised to buy GM's Opel, creating European vehicle giant

French automaker PSA Group is expected to announce tomorrow that it has purchased General Motors Co's (GM) money-losing European auto business, according to two people briefed on the matter.

On Friday, sources said PSA Group, which makes Peugeot and Citroen cars, had struck a deal with GM to buy Opel division.

Prime Minister Theresa May spoke with the boss of Peugeot SA to discuss the takeover bid, and the UK's business secretary, Greg Clark, has met with the French government and PSA. Between them, PSA and GM Europe recorded 71.6 billion euros ($76 billion) in revenue and 4.3 million vehicle deliveries previous year.

The French PSA Group, parent company of Peugeot/Citroen, has been negotiating with GM to purchase the loss-making European vehicle brand for several weeks.

To build support for the deal, PSA executives have been touring Europe to meet with labour leaders and politicians and assure them that Opel's workers and production sites will be protected.

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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 negotiations had encountered problems over GM demands that a PSA-owned Opel be barred from competing against its own Chevrolet lineup in markets including China, they said.

PSA likely used a non-compete clause to help convince GM to pay more into the pension.

PSA boss Carlos Tavares said last week a full acquisition of Opel offered an "opportunity to create a European auto champion" and quickly exceed 5 million annual vehicle sales. PSA also expects savings of up to 2 billion euros ($2.1 billion) from the tie-up, sources have said.

The article goes on, saying 2016 marks the 16 consecutive year of losses for GM's European devision, making GM's willingness to ditch the brand-over which it has held control for 90 years-not all too surprising. There was also the matter of potential job losses, but PSA has made the promise to "respect the existing agreements".

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