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GM sells its Opel brand to PSA Group’s Peugeot

General Motors has revealed its decision to sell Opel to PSA Group’s Peugeot thereby giving PSA Group the much needed assets to emerge as a new regional car giant.

The deal valued the business at 2.2 billion euros ($2.3 billion). PSA Group intends to return Opel and its British Vauxhall brand to profit, with an operating margin of 2 per cent within three years and 6 percent by 2026. PSA is confident that it will be able to bring about an Opel-Vauxhall turnaround in just a few years.

Thanks to Opel’s acquisition, PSA Group is now Europe’s second-ranked carmaker by sales, with a 16 per cent market share to VW’s 24 per cent. Last year, PSA and GM Europe recorded 72 billion euros in revenue and 4.3 million vehicle deliveries between them.

As far as the deal is concerned, General Motors will be receiving 1.32 billion euros for the Opel manufacturing business – 650 million euros in cash and 670 million in PSA share warrants.

The Paris-based carmaker and BNP Paribas will pay a further 900 million euros for the Opel financing arm and operate it as a joint venture, fully consolidated by the French bank.

General Motors hasn’t been faring well in Europe and the sale of Opel effectively seals GM’s exit from the region. Eight years after coming close to selling Opel to Magna International, the Detroit auto giant has faced investor pressure to offload the business and focus on raising profitability rather than chase the global sales crown currently held by VW.

After fending off 2015 merger overtures by Fiat Chrysler with support from her board, GM boss Mary Barra agreed to target a 20 per cent minimum return on invested capital and pay out more cash to shareholders.

The two carmakers, which already share some production in an existing European alliance, confirmed last month they were negotiating an outright acquisition of Opel and its British Vauxhall brand by PSA, sparking concern over possible job cuts.

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