PSA Said Close to Finalizing Agreement With GM on Opel Purchase

  • Automakers aiming for announcement as soon as early next week
  • Discussions said to include the futures for Opel, Chevrolet

PSA CEO Speaks to U.K.'s May, Germany's Merkel About Jobs

PSA Group is in the final phase of reaching an agreement to buy General Motors Co.’s Opel that could allow for the U.S. automaker to return to Europe later, according to people familiar with the matter.

Both companies are planning to continue negotiations through the weekend with the aim of announcing a deal on Monday, said the people, who asked not to be identified as the plan isn’t public. The complexity of talks could lead to a delay, the people said.

Final matters of discussions include the French carmaker’s ability to sell Opel vehicles globally and the U.S. company’s right to bring Chevrolet branded models to Europe down the line, two people said. In a sign that talks have progressed, a meeting between PSA management and top European labor union officials has been tentatively scheduled for next week, one person said.

PSA and GM reached a deal for the French company to buy Opel, with PSA’s board approving the purchase Friday and an announcement set for Monday, Reuters reported Friday, citing people familiar with the matter. PSA declined to comment on the report. The company earlier confirmed the potential union meeting next week and said it could be canceled or postponed because discussions were ongoing and the carmakers hadn’t set a timeline.

A spokesman for GM’s European unit declined to comment.

Key Points

One of the key negotiating points is how PSA can achieve about 2 billion euros ($2.1 billion) in savings from a deal, said one of the people. These would come largely from potential future capacity reductions as well as savings from joint purchasing, sharing more parts and lowering overhead costs, the person said.

PSA Chief Executive Officer Carlos Tavares plans to revive GM’s unprofitable Opel and Vauxhall brands with a restructuring similar to his project that brought the maker of Peugeot and Citroen cars back from the brink over the past three years. Opel, based near Frankfurt, could in turn serve as a growth driver with potential for expansion beyond its home region, a role that was limited under GM’s ownership, Tavares said last week.

GM shares rose 1 percent to $38.14 as of 2:01 p.m. Friday in New York trading.

Carlos Tavares on Feb. 23.

Photographer: Christophe Morin/Bloomberg

Sales volume is critical in Europe’s largely saturated mass-market segment, and adding GM’s roughly 1.2 million in annual deliveries in the region would help PSA spread the cost of developing new cars and engines across a larger number of vehicles.

Another issue in the talks is how GM and PSA will manage the pension plan for Opel retirees, people familiar with the discussions have said. The program is underfunded by about $9 billion, according to data compiled by Bloomberg. Other complex questions to resolve include licensing fees for technology used in Opel cars and plans to cut production capacity.

To build support for the deal, PSA executives have been touring Europe to meet with labor leaders and politicians and assure them that Opel’s workers and production sites will be protected. France and Germany have emphasized the importance of preserving jobs and plants in both countries, and called on PSA to translate future growth into long-term employment security.

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