VIDEO: Has GM Given Up on Europe?

GM’s European operations have been sold to France’s PSA Group. Who got the better deal?

Well, the dust has settled on possibly the most anticipated deal in the automotive universe: GM’s European operations have been sold.

The buyer is France’s PSA Group, builder of Peugeot and Citroen brands, and it’s a logical move for them, adding a legacy brand in Germany as well as the number two auto brand in England, Vauxhall, plus Holden in Australia.

The deal works for both firms: PSA becomes a truly European carmaker and GM divests itself of a money-losing train wreck that has lost USD $20 billion over the last two decades.

The details of the deal are pretty interesting from a manufacturing perspective. In effect, GM is now no longer a global automaker, with no production footprint in Europe. GM did, however, strike a development deal with PSA in 2012, and the first vehicles born out of that collaboration are about to reach European showrooms, so PSA should have little trouble integrating the Opel operations.

But what happens to GM?

General Motors pockets $1.4 billion in cash and stock while keeping legacy worker pension obligations. This would seem to water down the deal’s value considerably from GM’s perspective, but the auto cycle is peaking now, so there will likely never be a better time to sell than right now.

But why sell at all?

The financial press isn’t saying, but I think the main reason to pull the plug now is because of a major shift in the way light vehicles are designed and built globally. 30 years ago, the move to global platforms like Ford’s Focus and Chevy’s Cavalier looked like a natural one for European engineering teams experienced in building the smaller 4- and 6-cylinder vehicles that were expected to represent the future as oil process spiked.

And they succeeded, globalizing the manufacturing expertise and engineering talent. Now, major automakers don’t need European or Asian engineers to show them how to design and build smaller, lighter vehicles. There’s simply less to offer from a European carmaker’s perspective. Combine this with cheap oil and a resurgence in large SUV and light truck popularity and I think GM pulled the trigger at the right time.

Does this mean that PSA lost?

No, they get modern European design and production facilities, strong global brands and become Europe’s second largest carmaker after Volkswagen. Watch for some serious platform consolidation over the next five years as PSA rationalizes production in the overbuilt European market.

And here’s an interesting fact that fell through the cracks in the media coverage: GM is keeping its Torino engineering center, which developed the diesel engines used in the Chevrolet Cruze Diesel and the upcoming Chevrolet Equinox Diesel. The 2017 Cruze Diesel meets the tough diesel emissions standards while delivering an EPA highway fuel economy rating of 52-miles-per-gallon, the best of any non-hybrid, non-electric vehicle.

GM plans 10 diesel models by the end of 2018 in North America. Is GM hedging the electric car craze? If so, they’re going to be a powerful contender with the pure electric Bolt, hybrid Volt and a range of fuel efficient diesels.

If oil prices spike, or carbon taxes are levied on light vehicles, they’ll be in the right place at the right time.

Written by

James Anderton

Jim Anderton is the Director of Content for Mr. Anderton was formerly editor of Canadian Metalworking Magazine and has contributed to a wide range of print and on-line publications, including Design Engineering, Canadian Plastics, Service Station and Garage Management, Autovision, and the National Post. He also brings prior industry experience in quality and part design for a Tier One automotive supplier.