PSA (Peugeot/Citroen) buys GM’s Vauxhall/Opel for £1.9 Billion

PSA – Peugeot Citroen and DS – has bought General Motors’ European operations – Vauxhall and Opel – in a  deal worth €2.2 billion (£1.9 billion).

As we reported at the weekend, PSA – that’s the French company which owns Peugeot, Citroen AND DS – is buying the European operations of GM (General Motors) – including their finance arm – in a deal worth around £1.9 billion.

Vauxhall and Opel have been an accident waiting to happen for nearly twenty years, with GM not having turned a profit in Europe thus millennium, and a  deal with PSA is perhaps the best Vauxhall and Opel could hope for.

The deal comprises all of GM’s European Operations comprising of the Vauxhall and Opel brands, six assembly and five component manufacturing facilities, one engineering centre and around 40,000 employees. But almost all of GM’s Pension obligations will stay with GM, and GM will pay PSA £2.6 billion to settle those pensions which are transferred to PSA. Which is somewhat more than the cost of purchase.

But new ownership will mean big changes and cost cutting, with PSA already over capacity in Europe it will have to rationalise its production centres. Sadly, that will fall, to a degree from ‘Ouch’ to ‘Goodbye’ on Vauxhall’s operations in the UK. Nothing else really makes sense for the new, enlarged, PSA Group.

However, it seems the PSA axeman is not going to start hacking away at Vauxhall’s forest just yet, with promises extracted that Ellesmere Port is safe until 2020 and Luton a bit beyond. But 2020 is just three years away.

Vauxhall employs 4,500 in the UK, but add in the supply chain and showrooms and it’s many more. Just how many jobs are likely to go we’ll have to wait and see.

Whatever happens to Vauxhall, PSA now becomes the second largest car maker in Europe, and the cost cutting target they’ve already revealed – £1.5 billion a year by 2025, with most of those implemented by 2020 – makes the price paid of £1.1 billion (the other £0.8 billion was for GM Financial’s European operations) look cheap.