Business First Look

GM to sell Opel, Vauxhall to French Peugeot maker

Announced on Monday, the $2.33 billion deal marks the American company’s retreat from a major market and raises concerns of job cuts in Europe.

The Opel logo stands the plant of the carmaker in Kaiserslautern, Germany, on Monday.
Uwe Anspach/DPA/AP | Caption

General Motors has made a deal with the French carmaker behind Peugeot, agreeing to sell its faltering European car brands in a 2.2 billion euro deal that has some fearing job cuts as an uncertain market moves forward.

The deal includes the GM-owned brands Opel, which is made in Germany, and Vauxhall, from Britain. With the $2.33 billion acquisition, the French Groupe PSA, which makes Citroën cars in addition to Peugeot, is slated to become the continent’s second largest automaker following Volkswagen.

GM has sold the brands in Europe since the 1920s, but failed to turn a profit between the two for the past 18 years. The automaker began to see a turnaround last year but fell behind again after Britain’s vote to leave the European Union caused the pound to steeply drop in value.

"Without Brexit, we would have reached the breakeven goal" to the European leg of the business, GM chairman and chief executive Mary Barra told reporters Monday.

PSA executives say the company has no plans to cut existing jobs, but it plans to invest in research and development. That, they hope, will allow the company to avoid plant closures while redeveloping technology and the design of vehicles.

But turning Opel and Vauxhall around could prove a challenging feat. PSA plans to bring the experience of elevating its own failing brand just a few years ago to the task.

"We're confident that the Opel-Vauxhall turnaround will significantly accelerate with our support," PSA chief executive Carlos Tavares said.

The company narrowly avoided bankruptcy in 2014 after selling 14 percent of its stakes to the French state and the Chinese motor company Dongfeng. Since, PSA has seen profits rise in a two-year turnaround.

But that required Mr. Tavares to cut around 3,000 assembly line jobs in France through voluntary departures, trimming wage costs to 11 percent of revenue, down from 15 percent.

"Tavares wants to create healthy competition between the plants," a person close to the deal told Reuters. "They will be competing for workload."

Analysts say Western Europe’s auto market, which is the third largest in the world following China and the United States, could be nearing a peak, possibly forcing the group to shutter several plants within the next half decade. And as Britain moves to leave the European Union, Vauxhall’s two plants in Ellesmere Port and Luton could see additional challenges. The company employs some 4,500 people.

Yet Tavares remains hopeful for Opel’s plants, noting that exports could help to boost profits, as the “Brexit” vote has ushered in some new opportunities.

"The way I look at this is positioning Opel-Vauxhall to be incredibly successful in the future," Ms. Barra said.

This report contains material from Reuters and the Associated Press.