PSA Group and General Motors are talking about possible strategic initiatives that could boost their operations. With General Motors planning to leave Europe, offloading its European business could be one of its choices.
The two companies' discussions involved possibly selling General Motors' Opel to the maker of Peugeot and Citroen cars, according to a report by Bloomberg News. Opel also handles Vauxhall, the car brand that is popular in the United Kingdom.
It is not clear how much General Motors will ask for the sale of Opel and Vauxhall to PSA Group. However, analysts estimate that its European business has an enterprise value of 2.6 billion euros, or $2.8 billion.
Acquiring Opel will boost PSA Group's scale and share of the European market, Yahoo Finance reported. If PSA Group adds Opel and Vauxhall to its operations, its market share in Europe will expand to the point that it will be declared the second largest carmaker in the continent.
Meanwhile, selling Opel and Vauxhall will complete General Motors' plan to exit Europe. The U.S. carmaker has decided to stop its operations in the continent right after the United Kingdom voted to exit the European Union. With Brexit, General Motors would have to have operations in one of the remaining countries in the European Union and another in the United Kingdom.
General Motors has been suffering from significant losses in its Europe operations for years. While a sale of its Europe division could help improve its balance sheet, it could still feel the negative impact of losing Opel as it is the main provider of design works to the U.S. carmaker.
Analysts and industry experts believe that the sale will not really mean that General Motors will completely cut off Opel and Vauxhall. They are expecting PSA Group and General Motors to continue cooperating in the future.
The news comes just as carmakers are facing increasing pressure from President Donald Trump to expand their investments in the U.S., Jobs & Hire reported.