PSA Group Buys Opel from General Motors
General Motors has, for a long time now, been trying its best to penetrate into the European market and place its firm feet there. Unfortunately, the American automotive giant hasn’t been able to do exactly what it intended to do.
This has led General Motors towards taking certain steps in order to keep itself from investing in something that does not bring returns. The American automaker recently sold the European division of Opel to the popular PSA Group.
The Deal
It was announced last Monday that GM has sold the said division to the PSA Group for a total of $2.3 billion. Carlos Tavares—Chairman Managing Board PSA—said,
“We are proud to join forces with Opel/Vauxhall and are deeply committed to continuing to develop this great company and accelerating its turnaround,”
It is widely believed that the deal is quite beneficial on part of both the companies. While GM has not been able to perform very well in Europe, PSA Group is among the key players in the European automobile market. Mary Barra, who is the CEO of General Motors, said that she is happy with the measure GM took as it will no longer hold the company back in its performance. She also said that she is happy for Opel and Vauxhall as they are likely to be better off this way in the long term.
GM investors
Just as the deal got announced on Monday, a major concern rose among the investors as to what the deal means for them. There are a few key points for such investors. To start off, General Motors will be retaining the liabilities of Opel which are short $6.5 billion. The amount retained as of the moment is $9.8 billion. This means GM will discharge the total liabilities of $16.3 billion over time.
Furthermore, the American automaker will also charge PSA Group between $4-$4.5 billion comprising of charges that are related to the pension losses as well as deferred taxes. These charges will affect the net earnings of General Motors for the year 2017. However, the impact of these charges on the operating income for 2017 will be a minute.
Moreover, since GM does not need to maintain the cash reserve for Europe, it will be reducing its target by $2 billion. This means that the new GM cash-reserve target will be $18 billion.
The PSA Angle
With the deal, PSA has taken over all the rights to Opel’s and Vauxhall’s automotive operations, their assembly plants, component manufacturing facilities, and a set of 40,000 employees from GM. While the French group will receive the engineering center of Opel which is based in Russelsheim, GM has retained the one in Torino – Italy. This was a major move in the history of General Motors, and potentially a prolific one too!
Do you want a new replacement engine or transmission for your GM automobile? Get one right now from EngineWorld. We offer the best-used engines and transmissions that are imported from Japan. You can order one by dialing (800) 903-4430.
Sources
https://www.fool.com/investing/2017/03/06/general-motors-sells-opel-a-look-at-the-deal.aspx
http://www.businessinsider.com/gm-opel-sale-23-billion-2017-3
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