The GM-PSA deal at a glance

A look at key details of GM’s watershed decision to sell Opel and Vauxhall to France’s PSA:What: GM is selling Opel and Vauxhall to PSA Group in a $2.3 billion deal. The deal also includes the sale of GM's European finance operations to a 50-50 joint venture of PSA and banking giant BNP Paribas. The agreement vaults PSA into second place in European sales behind Volkswagen. GM, which acquired Opel in 1929, loses 1.2 million in annual car and light truck sales. The transaction includes all of Opel and Vauxhall’s automotive operations, the Opel and Vauxhall brands, six assembly and five component plants, an engineering center in Rüsselsheim, Germany, and approximately 40,000 employees. GM will retain an engineering center in Torino, Italy, a hub for diesel engine development.Why: GM hasn’t posted a profit in Europe since 1999 and has lost nearly $20 billion across the region since then. The sale will improve cash flow and allow GM to focus on more profitable U.S. and China operations. Amid sweeping geopolitics, the prospects of restructuring and strengthening Opel -- in a tough market that still hasn’t fully recovered and is some 1 million vehicles shy of its 1999 sales peak of 15 million, and is dominated by stronger brands such as VW -- are too daunting and wouldn’t generate sufficient returns for GM. One example: GM determined that it could not achieve significant economies of scale in emissions technology for Europe on its own. Luxury automakers such as BMW, Mercedes-Benz and Audi have also invaded part of Opel’s turf by selling more affordable cars. With only 20 percent of the vehicles in Opel’s future product lineup to be shared with the rest of GM, the European unit’s benefits to the rest of the company would have been diminished.Pluses: PSA gains scale in a key region. GM receives cash and freedom to move past a perennial management challenge and focus resources on more promising technologies such as autonomous vehicles.The risks: GM will lose scale and be the only one of the top five global automakers without a presence in Western Europe, the third-largest new-vehicle market. GM risks missing out on an improving European market at a time when the U.S. and China are considered to be at or near their peaks. GM retains liability for much of Opel’s pensions obligations, estimated at as much as $10 billion by analysts. A PSA-Opel marriage will generate 70 percent of its volume in Europe, making it far more susceptible to the region’s booms and busts. PSA must also navigate likely plant closings and job cuts in a region where political and union headwinds are substantial, analysts say. Down the road: By gaining scale over manufacturing and purchasing, PSA expects Opel/Vauxhall to reach a recurring operating margin of 2 percent by 2020 and 6 percent by 2026, and to generate positive cash flow by 2020. The deal limits the sale of Opel and Vauxhall vehicles to markets where they are currently on sale as long as they remain on GM architectures. Once PSA shifts Opel/Vauxhall vehicles to its own platforms, it will be free to sell them anywhere in the world. GM is not prohibited from offering car-sharing and other mobility services in Europe. The deal will free up $2 billion in cash that GM plans to use toward a $14 billion share buyback target.

The GM-PSA deal at a glance

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