PARIS (AP) – General Motors Co. is selling its loss-making European car business – including Germany’s Opel and British brand Vauxhall – to French automaker PSA group.
The 2.2 billion euro ($2.33 billion) deal announced Monday in Paris by GM and PSA – maker of Peugeot and Citroen cars – will realign the industry and create Europe’s No. 2 automaker after Volkswagen. The combined company could make 5 million cars a year.
PSA will join with French bank BNP Paribas in the purchase, which foresees taking over 12 manufacturing facilities that employ about 40,000 people, according to a joint statement by the companies.
PSA CEO Carlos Tavares called the deal “a game-changer for PSA as we become a 55 billion euro revenue company.” GM chief Mary Barra said it was a “win” for both sides.
Amid concerns about job losses in multiple countries, Tavares promised to keep existing GM commitments to workers.
GM will keep its manufacturing center in Turin, Italy. GM and PSA, which have had joint activities in the past, will continue to collaborate on electric car technologies and maintain existing supply agreements on some Buick models.
The purchase marks a major turnaround for PSA, bailed out just three years ago by Chinese investors and the French state. CEO Tavares hopes to parlay his success at PSA to similar savings at Opel, cutting costs through scale and better use of factory capacity.
Shares in PSA were up 4 percent at 19.82 euros in early trading Monday, suggesting investors find the terms of the deal positive overall for the company.
For GM, the agreement seems to suggest that Barra decided to focus on profits over market share. GM has not turned a full-year profit in Europe since 1999.
“This was a difficult decision for General Motors but we are united in belief that it is the right one,” she told reporters in Paris.
She noted Opel-Vauxhall would have broken even in 2016 had it not been for Britain’s decision to leave the European Union, which caused a plunge in the value of the pound.
The deal, subject to regulatory approval, is expected to be completed at the end of this year.
The move would give PSA access to technology and a larger scale to spread out engineering and other costs. The companies said they expect annual savings of 1.7 billion euros by 2026.
The price for Opel seems relatively small because of a big pension contribution for Opel’s underfunded plan.