PSA chief to meet French, UK officials in Opel approval push

[FRANKFURT] PSA Group Chief Executive Officer Carlos Tavares will meet with government leaders in the UK and France this week to push his plan to buy General Motors Co's Opel and Vauxhall brands.

Mr Tavares will meet French Economy Minister Michel Sapin on Wednesday morning and UK Prime Minster Theresa May at a date that hasn't yet been announced. The CEO already spoke to French Prime Minister Bernard Cazeneuve on Sunday, the premier's office said.

To win support for the takeover, the maker of Peugeot and Citroen cars will pledge to maintain Opel's independence, honor existing collective labour agreements and continue to invest in all four of its German sites until at least 2020, Bild am Sonntag reported.

British and German leaders are trying to prevent job cuts as PSA seeks to acquire GM's European operations to gain a bigger slice of a fiercely competitive auto market.

Both Paris-based PSA and Opel are low-margin, mass-market manufacturers with production in countries with high labour costs, and they face common challenges including tightening pollution standards.

GM and PSA, which disclosed talks on Feb 14, are discussing a valuation for Opel of roughly US$2 billion as the automakers push to reach an agreement as soon as the end of this week, people familiar with the matter said on Friday. The price would comprise about US$1 billion in cash and the assumption of roughly US$1 billion in liabilities, said the people, who asked not to be identified because the negotiations are private.

PSA shares fell as much as 1.8 per cent and were trading down 1.4 per cent at 18.27 euros as of 12 pm in Paris. The stock has gained 18 per cent this year.

The French manufacturer is scheduled to report 2016 earnings on Thursday, and people familiar with the matter have said that's the target date for reaching an agreement with Detroit-based GM, though a transaction may be delayed or even fall apart, given the complexities of the merger.

The takeover plan shocked leaders across Europe who were already contending with Britain's planned exit from the European Union, a chaotic French presidential election that includes a nationalist groundswell for Marine Le Pen, and German Chancellor Angela Merkel's reelection bid. German political leaders especially are pushing for job-preservation guarantees.

PSA has a global workforce of 184,000 employees, while Opel's totals 35,600, with about half in Germany and 4,500 in Vauxhall's home country of the UK.

While no binding guarantees have been made so far to secure jobs or sites, there are "constructive signs" for an agreement, Matthias Machnig, Germany's deputy economy minister and the government's liaison on the deal, said Monday on ARD television.

Opel chief Karl-Thomas Neumann said in a letter to employees on Friday that the Ruesselsheim, Germany-based division's works council and IG Metall union are closely involved in the talks. In its meetings with government leaders, PSA will promise not to carry out forced layoffs until next year, according to the Bild report.

A key sticking point in the negotiations is identifying ways to reduce costs that would earn support from labour leaders and governments, while still making the deal financially feasible given the companies' overlapping product portfolios and overcapacity in the European auto market.

A critical point is how a combined PSA-Opel can maintain UK production capacity after the models built there are redesigned, the people said.

Mr Tavares will also meet this week with Len McCluskey, general secretary of Unite, Britain's biggest labour union.

Mr McCluskey wants to ensure that PSA and Mr Tavares "understand fully" that "thousands of dedicated UK workers deserve a strong backer and a positive future," he said in a statement Sunday.

BLOOMBERG