Peugeot owner said to explore acquisition of GM's Opel unit

[LONDON] PSA Group, the maker of Peugeot and Citroen cars, is exploring an acquisition of General Motors Co's European business, according to people familiar with the matter, in a deal that would transform the region's automotive landscape.

The French carmaker is in talks to acquire Opel and UK sister brand Vauxhall from GM and an agreement could be reached in the coming weeks, said the people, who asked not to be identified because discussions are private. Negotiations could still fall apart, the people said.

PSA said it was in talks with Opel to expand existing cooperation projects. A spokesman for GM's European Opel unit declined to immediately comment. PSA shares rose 5.9 per cent to 18.99 euros at 12.06pm, valuing the company at 16.5 billion euros (S$24.902 billion).

A combination would create a manufacturer with about 16 per cent of the European car market, leapfrogging Renault SA to become the region's second-biggest auto group after Volkswagen AG. A deal would also be the second run at linking the two mass-market carmakers. GM sold a seven per cent stake in its French counterpart in 2013 after savings from a cooperation fell short of expectations.

PSA is considering the takeover to boost its scale, get access to Opel's engineering, electric-car technology and reap savings from joint purchasing and eventually cost cuts, according to one of the people. For GM, it would mark a clean exit from Europe, especially after the UK vote to leave the European Union weighed on the British pound and profits, the person said.

The failed cooperation with GM led PSA to seek a bailout in 2014 from the French government and China's Dongfeng Motor Corp, which each hold 14 per cent stakes along with the Peugeot family. Under chief executive officer Carlos Tavares, PSA has returned to profit by focusing on fewer, more lucrative models.

GM, meanwhile, has been forced to postpone plans to return Opel to break even, citing costs associated with the UK's plans to exit the European Union. GM's European operations posted a loss of US$257 million in 2016 after a deficit of US$813 million the previous year. GM has controlled Opel since 1929 but the unit has struggled to make a profit for years amid increasing competition from the likes of Hyundai Motor Co and Volkswagen's Skoda, which both have lower costs than the German-based manufacturer.

In the aftermath of GM's bankruptcy, the US automaker came close to selling Ruesselsheim, Germany-based Opel in 2009, but ultimately kept the unit to ensure a sizable presence in Europe. Opel's importance increased after GM pulled the Chevrolet brand from Europe, backing off on a planned expansion.

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