Cleveland, Ohio – Peugeot Citroen parent company PSA Groupe (PSA) has reportedly reached a deal to buy General Motors (GM)’s Opel and Vauxhall European brands with terms to be announced Monday.
Reuters and several other news agencies reported that a deal has been reached and that PSA’s board of management has approved it, ending weeks of speculation that began last month with the two companies confirmed that they were in talks.
GM has been losing money in Europe for about a decade – lots of money. A slow market on that continent, coupled with a fairly weak position for Opel and Vauxhall vehicles meant continued losses or a massive reinvestment in new products and marketing.
The sale could impact the North American market in a few ways.
- GM’s semi-luxury brand has gotten most of its car designs in recent years from Opel. The Cascada convertible car is a rebadged Opel made in Poland, while the Regal and La Crosse are slightly edited versions of the Opel Insignia. Those vehicles are selling poorly in the United States right now, as are most cars. GM’s tech center in Warren, Michigan, could take over engineering work on those cars, or the company could reshape Buick’s lineup to include more SUVs and crossovers with fewer cars.
- PSA CEO Carlos Tavares said recently that if his company buys GM’s European business, he would want to use the extra capacity to make vehicles for export with the U.S. being a major target market. Rumors swirling around the negotiations have GM officials insisting on some sort of non-compete clause for the first few years of the deal, so don’t expect Peugeot/Opel dealerships in the U.S. any time soon. In practical terms, a short-term non-compete agreement would have little impact. Tavares made it clear that PSA would need to revamp Opel’s product lineup and design process before taking products global, so there would be several years of product development and proveout before a U.S. launch.
- Ditching the money-losing European business would allow GM executives to focus on its profitable North American business and fast-growing Asian divisions. While there are some similarities between the various markets, there are more differences. Europe’s car market relies on high-volume sales of small, barely profitable cars with most profits coming from smaller numbers of luxury vehicles. Asian markets rely almost entirely on high volumes of low-cost, low-priced small cars. North America, on the other hand, sells fewer small cars, deriving most profits from trucks and SUVs. Keeping GM’s Asian business would continue to give the company some skin in the small-car game. Getting out of Europe would remove GM from that luxury-driven profit arena. GM would have to shift some priorities to support Buick from North America, something that could be done by working more closely with Cadillac, a brand already doing its design and development in the U.S.
About the author: Robert Schoenberger is the editor of Today's Motor Vehicles and a contributor to Today's Medical Developments and Aerospace Manufacturing and Design. He has written about the automotive industry for more than 17 years at The Plain Dealer in Cleveland, Ohio; The Courier-Journal in Louisville, Kentucky; and The Clarion-Ledger in Jackson, Mississippi.