Peugeot maker PSA confirms deal to buy Vauxhall and Opel

The PSA Group, which makes Citroën, DS and Peugeot cars, has confirmed it is purchasing the Vauxhall and Opel brands for €2.2bn (around Rs 15,617 crore). This move will make PSA the second largest manufacturer in Europe after Volkswagen with a 17 percent market share.

PSA said this will be the basis of profitable growth worldwide, while General Motors, current owners of the Vauxhall/Opel brands, said it "advances GM’s transformation and unlocks shareholder value through disciplined capital allocation".

In the press release confirming the purchase, PSA Group boss Carlos Tavares said the manufacturer would respect existing brand identities and "help accelerate [Opel's] turnaround".

"We are proud to join forces with Opel/Vauxhall and are deeply committed to continuing to develop this great company and accelerating its turnaround. We intend to manage PSA and Opel/Vauxhall capitalising on their respective brand identities. Having already created together winning products for the European market, we know that Opel/Vauxhall is the right partner. We see this as a natural extension of our relationship and are eager to take it to the next level.”

“We are confident that the Opel/Vauxhall turnaround will significantly accelerate with our support while respecting the commitments made by GM to the Opel/Vauxhall employees,” continued Tavares. The '"turnaround" refers to Opel's recent struggles; it lost £200m (around Rs 1,641 crore) in 2016.

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.

“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.”

Collaboration between the two firms 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.

The sale will create "substantial economies of scale in purchasing, manufacturing and R&D," said PSA. It said annual savings of €1.7bn(around Rs 12,000 crore) are expected by 2026 – of which a significant part is expected to be delivered by 2020, accelerating the turnaround. PSA expects Opel/Vauxhall to reach a recurring operating margin of 2 percent by 2020 and 6 percent by 2026, and to generate a positive operational free cash flow by 2020.

PSA recently announced its return to India but it is highly unlikely that the French automaker would consider re-launch the newly acquired Opel brand in India. GM brought its Opel brand to India in 1996 but it struggled to find success and consequently was shut down in 2006.