GM Gives Up on World’s Third Largest Car Market, Sells Europe Unit to PSA Group

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2017 Cadillac Escalade
Source: courtesy of General Motors Co.
The global car markets include three huge regions or countries. These are the United States, China and the European Union. General Motors Co. (NYSE: GM) decided to drop out of Europe, as, after years of losses, it could not fix its problems there.

The largest car company in the United States announced:

General Motors Co. and PSA Group  today announced an agreement under which GM’s Opel/Vauxhall subsidiary and GM Financial’s European operations will join the PSA Group in a transaction valuing these activities at €1.3 Bn and €0.9 Bn, respectively.

With the addition of Opel/Vauxhall, which generated revenue of €17.7 Bn in 20161, PSA will become the second-largest automotive company in Europe, with a 17% market share.

The value of the transaction in U.S. dollars is $2.3 billion.

GM took on an expensive obligation with the deal:

All of Opel/Vauxhall’s European and U.K. pension plans, funded and unfunded, with the exception of the German Actives Plan and selected smaller plans will remain with GM. The obligations with respect to the German Actives Plan and these smaller plans of Opel/Vauxhall will be transferred to PSA. GM will pay PSA €3.0 Bn for full settlement of transferred pension obligations.

In January, 1,170,020 passenger cars were sold in the EU, which was up an impressive 10.2% from the same month a year ago. GM’s Opel Group sold 74,315. That represents a market share of 6.4%. Volkswagen, the EU leader, posted sales of 281,877. Its market share was 24.1%. (U.S. car and light vehicle sales were 1,333,637 in January.)

In August 2012, then GM CEO Daniel Ackerson said the company would stay the course in Europe. It turns out, five years later, that he was wrong.

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