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PSA Inching Closer To Acquire GM Opel Division

General Motor’s (GM’s) European car brand Opel will soon come under the PSA Group. The French automaker is quite close to completing a deal with Detroit-based car maker GM on Monday, March 6.

GM it seems is finally dumping its European car business which was long standing and losing out money making its car business unprofitable. The acquisition was made in order to give a boost to GM’s business and also to dump unprofitable lines.

Details Of The Deal

French automobile group PSA will be buying the Opel and Vauxhall brands of GM as part of the acquisition. The deal may also result in job cuts.

As of March 2, GM and PSA had agreed upon narrowing down the differences on about $10 billion in Opel pension accountabilities and other issues.

However, there were some difficulties in the acquisition clauses when GM demanded that the now PSA-owned Opel be banned from rivaling against its own Chevrolet vehicle lineup in China and other overseas markets.

The “non-compete” clause was finally resolved when PSA decided to put in more into the pension, taking it up to $2 billion from $1 billion which was initially offered to GM. Other details of the deal like the final price of the purchase along with specific pension liabilities were not revealed.

PSA chief Carlos Tavares stated that the total possession of Opel and Vauxhall will offer the company an “opportunity to create a European car champion”. He further stated that as a result of the deal, the PSA annual vehicle sales would also go up to $5 million. The French automobile manufacturer also expects to save at least $2.1 billion from this deal.

Growing Pension Deficits To Come To An End?

If the deal between these two cars makers goes through, it could ensue in a huge political battle to save jobs and protect plants between the French and the German governments, given Germany is the home of the Opel brand.

The deal is expected to include a plan to bring an end to Vauxhall and Opel increasing pension deficits. Around 4,500 employees work in Vauxhall UK production sites of Ellesmere Port in Cheshire and Luton. Both the plants of Vauxhall in the UK, together account for a pension deficit of £1 billion (approximately $1.23 billion), which at the end of 2014 was £840 million (approximately $1035 million).

The PSA chief, however, assured one and all that existing production commitments will be met, stating that the UK car manufacturing plants will be open till at least 2020. However, the German Opel plants are a whole new ball game altogether.

According to a former UK business secretary, PSA should pad up to face heavy lobbying from the German government, who will attempt to protect the 35,000 Opel workforce and its plants.

Photo: John Lloyd | Flickr 

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(Via TechTimes)