General Motors Sells Opel for EUR2.2 Billion
March 06 2017 - 2:04AM
Dow Jones News
By Nick Kostov
PARIS-- General Motors Co. on Monday said it has agreed to sell
its European business Opel for EUR2.2 billion ($2.33 billion), as
the U.S.'s biggest auto maker withdraws from a region where it
hasn't made money for almost two decades.
Peugeot SA will pay EUR1.3 billion for GM's Opel and Vauxhall
brands, the companies said Monday. GM's financial operations will
be jointly acquired by Peugeot and BNP Paribas SA for about EUR900
million.
As part of the deal, GM will also get warrants to purchase 4.2%
of Peugeot's capital. These options can be exercised starting five
years after the issue date so GM won't become a shareholder in the
French company immediately.
Unloading Opel, which sold its first vehicle at the end of the
19th century and now sells about 1 million vehicles a year in
Europe, will knock GM's global volume down 10% and indicates Chief
Executive Mary Barra has shelved any plans to re-enter the running
for the crown as the world's largest car maker.
The plunge in the pound following the Brexit vote in the U.K.,
where Opel sells about 250,000 vehicles a year under the Vauxhall
brand, torpedoed what had been an expected return to profit last
year.
While it will lose volume, GM will get an immediate boost to its
profit margin as Opel has failed to turn a profit since 1999 and
has lost on average about $1 billion a year since then. Detroit
rivals Ford Motor Co. and Fiat Chrysler Automobiles NV have
returned to the black in Europe recently.
For Peugeot Chief Executive Carlos Tavares, the acquisition is a
daring move from an executive who has made a name for himself over
the past three years at the helm of the French company as a
cost-cutter more intent on squeezing out savings from existing
operations than building volumes.
Mr. Tavares is betting that he can steer a successful turnaround
at GM's European operations, similar to the project he put in place
to bring Peugeot back from the edge of bankruptcy just four years
ago. Mr. Tavares said last week that he could expand the Opel brand
beyond its home region, and analysts have speculated that he could
use it to make a push into the U.S. market.
Write to Nick Kostov at Nick.Kostov@wsj.com
(END) Dow Jones Newswires
March 06, 2017 01:49 ET (06:49 GMT)
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