The Strategist

PSA Group is in talks to buy Vauxhall and Opel

02/14/2017 - 14:18

PSA Group, manufacturer of Peugeot and Citroen cars, is discussing purchase of General Motors’s European business, including Vauxhall and Opel brands, Bloomberg reported citing its sources. If this deal goes through, it will transform the entire European market. PSA will jump ahead of Renault SA and become the second carmaker after Volkswagen AG with 16% of the market.

2Tales via flickr
2Tales via flickr
After the announcement, PSA’s quotes rose by almost 6%, and the company’s market cap reached € 16.5 million.

PSA, according to sources, is in talks with Opel company to expand the current cooperation agreements. The company is also interested in gaining access to Opel’s engineering technologies, said one of the sources. As for GM, the deal would mean a withdrawal of the American-based company from the European market. Opel’s spokesman declined to comment.

Groupe PSA (PSA Peugeot Citroen) is the second largest producer of passenger cars in Europe after Volkswagen AG. It was formed when Peugeot purchased 90% stake in Citroen in 1976.

GM manufactures cars and trucks in 30 countries; sells and carries out maintenance in 140 countries. The group is headquartered in Detroit (Michigan).

At the end of 2016, Opel again suffered losses, although its management hoped to get in the black after a radical reorganization. Opel’s losses are adversely affecting its parent company's balance sheet. Loss of General Motors in the European market amounted to 257 million dollars in 2016 (240 million in terms of euro). Opel’s Head Karl-Thomas Neumann associates the negative balance with Brexit and depreciation of the British pound.

Sales of passenger cars in the EU in 2016 increased by 6.8% to 14.64 million vehicles, said the European Automobile Manufacturers’ Association (ACEA). The EU car market has shown a positive trend for the third year in a row. Despite political instability and economic uncertainty related to Brexit and referendum in Italy, demand for cars remained strong, the Association noted.

Sales growth was relatively stable throughout the year and in all major markets in the region. In Italy, sales of passenger cars for the year increased by 15.8% (to 1.82 million units.), in Spain - by 10.9% (1.15 million), in France - 5.1% (2.015 million), Germany - 4.5% (3.35 million), in the UK - 2.3% (2.69 million).
Volkswagen Group was the European leader with 3,5 million (up 3.5%) cars sold, including Volkswagen brand (1,65 million, 0.5% decrease). Renault Group occupied the second place, selling 1.496 million vehicles (+ 12.1%), including Renault brand (1.08 million, + 13.1%). PSA Group is the third car manufacturer in Europe. Its sales amounted to 1,45 million unit (-0.2%), including Peugeot brand, which sold 849,850 cars (+ 1.4%). Ford sold 1.02 million vehicles (up 3%), BMW Group - 987 479 cars (+ 10,1%), including BMW brand (784 395 units, + 9,7%), Opel/Vauxhall - 976 616 vehicles (+ 5.6%).

Opel’s owner, European division of GM Group, already has close working relationship with PSA. Previously, the manufacturer decided to replace minivans Meriva and Zafira with a new line of crossover, following trends of the global automotive market. Crossovers now are considered more practical, and demand for MPV is falling sharply. New family of Opel and Vauxhall crossovers will be developed with contribution from PSA. In this case, the French will supply components to Grandland X model. The future market newcomer will be built on the French concern’s platform EMP2. Its counterparts are crossovers Peugeot 3008 and 5008, and, perhaps, the German model will be assembled at a French plant in Sochaux.