Peugeot owner buys GM’s Opel in industry consolidation step

PSA Group completed the acquisition of General Motors Co’s money-losing European division, kicking off one of the auto industry’s most complex turnaround efforts amid mounting political pressure to tighten emissions rules in the region.Michael Lohscheller, the new chief executive officer of the unit comprising the Opel and Vauxhall brands, will present a business plan in 100 days, Paris-based PSA said yesterday in a statement.“We are witnessing the birth of a true European champion today,” PSA CEO Carlos Tavares said in a separate release.The deal will reinstate PSA, the maker of Peugeot, Citroen and DS cars, as Europe’s second-biggest auto manufacturer by sales. Picking up GM’s 1.2mn annual deliveries in Europe allows the French company to spread the cost of developing new vehicles across a larger production network. Gaining scale is vital for mass carmakers as they try to stay ahead of self-driving and electric-vehicle innovations while Silicon valley firms like Apple and Uber Technologies plot inroads into the industry. Auto manufacturers are also facing spending pressure as regulators crack down on diesel emissions.GM is selling Ruesselsheim, Germany-based Opel, its UK sister brand Vauxhall and their car-financing operations for €2.2bn ($2.6bn). The Detroit-based car maker said in June it anticipates a charge of about $5.5bn at the deal’s closing.Tavares will need to replicate a turnaround at Opel that he achieved with PSA three years ago, though he has yet to specify any cutbacks along the lines of the French manufacturer’s measures. PSA reaffirmed commitments in April to Opel labour agreements as well as to the German company’s plans to bring out a new sport utility vehicle at the end of the decade.PSA reiterated goals on Tuesday for annual savings from the Opel deal of €1.7bn by 2026 through shared development costs, factory investments and purchasing. Operating profit margins are targeted at 2% of revenue by 2020 and 6% by 2026 for the former GM business, it said. More than half of Opel vehicles will be made on common technology platforms by 2019, it said.Shares of PSA rose 0.4% to €18.27 as of 10:52am in Paris. The stock has gained 18% this year, counter to a 2.4% decline in the Stoxx 600 Automobiles & Parts index.French competitor Renault overtook PSA last year as Europe’s second-biggest carmaker by sales, while Opel and Vauxhall ranked sixth. The combined market share of PSA and the GM businesses in the first half of 2017 was 16.2%, down from 17% a year earlier, amid pressure from Renault and Fiat Chrysler Automobiles. Volkswagen remains the dominant carmaker at 23.4% of the market, according to industry data.GM, which has owned Opel for almost 90 years, pulled the plug after the division missed a target to break even in 2016, contributing to losses that have totalled about $9bn since 2009. The US manufacturer is on the hook for much of Opel’s pension obligations and will pay PSA €3bn to settle some retirement plans. Still, the deal will free up about $2bn in cash, which GM plans to use for share buybacks.PSA is paying GM €1.13bn in cash and €650mn of warrants. It’s acquiring the financing unit in a joint venture with BNP Paribas, which will provide the remaining €460mn.