1. News
March 6, 2017

PSA set to become second-largest European car maker after $2.3bn deal with General Motors

France’s PSA Group, the car giant who owns Peugeot and Citroen will buy the European arm of General Motors (GM) in a $2.3bn deal.

The agreement comes after months of negotiations, delayed due to concerns surrounding Opel’s pension deficit and other complications in relation to the compatibility of GM’s electric car technology.

PSA will become the second-largest automotive company in Europe, creating a new challenge to Volkswagen, the regional market leader.

The company will have a 16 percent market share, not far behind Volkswagen’s 24 percent.

The French car maker, which only three years ago was on the brink of collapse, hopes to return Opel, the German automotive manufacturer and its British Vauxhall brand to profit, targeting an operating margin of two percent within three years.

Both PSA and GM said the deal was expected to generate annual savings of €1.7bn by 2026.

“For GM, this represents another major step in the ongoing work that is driving our improved performance and accelerating our momentum,” said Mary Barra, chairman and chief executive of GM in a statement.

“We believe this new chapter puts Opel and Vauxhall in an even stronger position for the long term and we look forward to our participation in the future success and strong value-creation potential of PSA through our economic interest and continued collaboration on current and exciting new projects.”

Are jobs at risk?

The deal has sparked concerns surrounding job security.

Currently, there are 4,500 people employed at the Vauxhall plants at Ellesmere Port and Luton.

Opel employs 19,000 people at its sites in Germany.

Len Mcluskey, general secretary of Unite, the UK’s largest trade union said he wants assurances that jobs will be protected.

“While initial discussions with the PSA Group have been relatively positive, our priority now is to ensure a long-term future for our plants and the tens of thousands of workers depending on them,” he said.

Speaking after announcing plans to buy GM’s European arm, PSA chief Carlos Tavares said tough terms for leaving the EU could be an “opportunity” to build more UK manufacturing plants.

“[There is] the opportunity to have inside of the UK some manufacturing plants in case we have a hard Brexit,” he said. “All of this represents opportunities that we want to tackle.”

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