Purchase of Opel and Vauxhall by the PSA Group completed

The PSA Group has announced that it has completed its purchase of the Vauxhall and Opel brands for €2.2bn (Rs 16,817 crore). The group, which makes Citroën, DS and Peugeot cars, will now be the second largest manufacturer in Europe after Volkswagen with a 17 percent market share.

Following the announcement, PSA said a new plan will be presented in 100 days that is meant to "generate a positive operational free cash flow by 2020 as well as an operating margin of 2 percent by 2020 and 6 percent by 2026." It also said four new members would join the Opel leadership team headed up by CEO Michael Lohscheller.

PSA chief Carlos Tavares said: “We are witnessing the birth of a true European champion today. We will unleash the power of these iconic brands and the huge potential of its existing talents. Opel will remain German, Vauxhall will remain British. They are the perfect fit to our existing portfolio of French brands Peugeot, Citroen and DS Automobiles."

Lohscheller commented: “We are eager to build the plan with PSA’s support and obviously together with our partners from the Works Council and the unions.” Opel added that synergies within PSA, for example in purchasing and development, will play a major part. It said the combined entity will unlock substantial economies of scale and synergies in purchasing, manufacturing and R&D estimated at €1.7bn (Rs 12,994 crore) at run rate.

The firm also confirmed that it will run a much leaner management structure. This confirmation follows the announcement last month that the European Union's antitrust authority “unconditionally approved” PSA’s plans to buy the European arm of General Motors (GM), concluding that “the transaction would raise no competition concerns”.

Globally, PSA sold 3.5 million units last year, while Vauxhall/Opel sold 1 million. Taking on the GM brands means PSA's volume will be 4.5m at the current sales rate.

In a press release confirming the purchase, PSA Group boss Carlos Tavares said the company would respect existing brand identities and "help accelerate [Opel's] turnaround" referring to its recent struggles. Last year, it lost £200m.

GM boss Mary Barra said: “For GM, this represents another major step in the ongoing work that is driving our improved performance and accelerating our momentum. We are reshaping our company and delivering consistent, record results for our owners through disciplined capital allocation to our higher-return investments in our core automotive business and in new technologies that are enabling us to lead the future of personal mobility.”

Collaboration between the GM and PSA is likely to include the use of electrification technologies and existing supply agreements for Holden and certain Buick models. PSA may also source fuel cell systems from the GM/Honda joint venture.

Opel/Vauxhall will also continue to benefit from intellectual property licenses from GM until its vehicles convert to PSA platforms. This suggests that as Opel/Vauxhall models come to the end of their current life – for example, the Astra is due to be replaced in 2021 – vehicles will move on to PSA platforms. If this is the case, then current production cycles would be maintained and this would ensure both Opel/Vauxhall plants in the UK were safe until at least 2021.

Opel/Vauxhall boss Karl-Thomas Neumann said at Monday's press conference: “We do not need to shut down any plants. If you look at the track record of PSA over the last few years, the numbers being the improvement of efficiency of our plants, it is a fact to say that since I took the helm of PSA we did not close any plants." He added that he would improve the efficiency of GM plants, but did not elaborate further.

The buyout includes all of Opel/Vauxhall’s motoring operations, including both the brands, six assembly and five component-manufacturing facilities, one engineering centre and about 40,000 employees. GM will retain an engineering centre in Torino, Italy, which is a diesel powertrain R&D centre and home to the so-called Whisper diesel.

The €2.2bn deal consists of GM’s Opel/Vauxhall subsidiary and GM Financial’s European operation, valued at €1.3bn (Rs 9,937 crore) and €0.9bn (Rs 6,879 crore) respectively. PSA has also confirmed that GM Financial's European operations will become a joint venture with BNP Paribas.

Speaking at the Geneva motor show, Neumann said: "We design and build excellent cars. We know we have a lot of work ahead of us, but we not afraid, but we are looking forward to the future which goes hand in hand with the PSA affiliation."

The Vauxhall brand, purchased by GM in 1925, presently accounts for around one-fifth of Opel sales, with the UK traditionally being the largest market for the Corsa and Insignia. However, its future under the possible control of PSA raises some uncertainties. One scenario already mentioned by GM sources in discussions with our sister publication Autocar UK, is the possibility of a sweeping consolidation of Vauxhall's operations in the UK, with the brand name consigned to history and replaced by Opel – a move that was once seriously considered by GM following the financial crisis of 2009.