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Report: GM Valuing Opel At $2 Billion

Report: GM Valuing Opel At $2 Billion

General Motors is reportedly valuing its European operations at about $2 billion. The company rocked the industry earlier this week when it confirmed it is in discussions to sell its European Opel/Vauxhall brands to French automaker PSA.

The report claims GM is seeking $1 billion in cash and that Opel/Vauxhall has roughly another $1 billion in liabilities that PSA would assume as part of the $2 billion deal. The liabilities include items such as Opel’s pension liabilities.

Reports also claim that the talks between the two automakers are more advanced than originally thought, with a finalized deal possible as early as next Thursday. Chief executives of both companies have been meeting with heads of state in Germany, France and the UK to ease fears over potential job losses associated with the deal. At this time it does not appear that there will be any significant hurdles if the two willing parties can make a deal.

Assuming GM can sell Opel for $1 billion in cash, it would be but a small consolation prize for the automaker. Opel has generated losses in excess of $9 billion since GM emerged from bankruptcy protection in 2009. It has been unprofitable for over a decade now.

GM attempted to sell the Opel brand back in 2009, but GM pulled out of negotiations at the last minute because the company was too dependent on Opel for the development of small cars. As such, GM set forth on plans to restructure Opel and has been working towards its goal of profitability since 2013. Subsequently the company has reduced its reliance on Opel for small car development.

Last year Opel reported a $248 million loss, the smallest loss in many years. In fact, GM executives assert Opel would have been profitable had it not been for the UK’s Brexit move, which tanked the value of the British pound, negatively impacting currency exchange rates.

Even if Opel would have generated a small profit last year, the road ahead is still rough for GM’s European operation. Despite its biggest rival Volkswagen AG being knocked down by its own diesel scandal, Opel still failed to gain marketshare in 2016. The company is also saddled with excess production capacity in Europe, a market in which growth is expected to be flat at best for the foreseeable future.





 

About Nick Saporito

AutoVerdict Senior Editor Nick Saporito began writing about cars at age 13. Nick ran a couple of automotive enthusiast sites for several years, before taking some time off to focus on his career and education. By day he's a marketing executive in the telecom world and by night he hangs out here at AV. You'll find him focusing on tech, design and the industry's future.
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  1. arutherford
    nsaporito
    Yet Ford is backing off One Ford...


    Not for its core lineup.
    nsaporito
    Tone
    Sure, but for there to be an additional 1M Opel's, there needs to be production in the EU. Germany appears to be too high-cost and GM seems to fear their UK plants no longer having duty-free access to the rest of Europe. Unlike VW, GM hasn't moved production to lower cost Eastern Europe locales and already seems to have excess production capacity.

    So, keep Opel and have 1M in unprofitable sales. Or sell and import a smaller amount of cars from countries with EU trade agreements (Mexico, Canada) at lower volumes but at least make a profit. The seem to be leaning towards the latter.


    That's really the apex of all of this. GM should have spent the last two decades trying to move production to Eastern Europe, but they didn't. To some degree it appears it was virtually impossible due to the IG Mattel union and German government.
    Tone
    arutherford
    Thats great that Buick sells 1 million units a year on its own. However, it would sell 2 million a year with Opel. That would lower engineering costs, etc overall just like One Ford has worked for Ford.


    Sure, but for there to be an additional 1M Opel's, there needs to be production in the EU. Germany appears to be too high-cost and GM seems to fear their UK plants no longer having duty-free access to the rest of Europe. Unlike VW, GM hasn't moved production to lower cost Eastern Europe locales and already seems to have excess production capacity.

    So, keep Opel and have 1M in unprofitable sales. Or sell and import a smaller amount of cars from countries with EU trade agreements (Mexico, Canada) at lower volumes but at least make a profit. The seem to be leaning towards the latter.
    nsaporito
    arutherford
    Thats great that Buick sells 1 million units a year on its own. However, it would sell 2 million a year with Opel. That would lower engineering costs, etc overall just like One Ford has worked for Ford.


    Yet Ford is backing off One Ford...
    arutherford
    Tone
    Thanks to China, Buick is selling over a million vehicles globally, with a nice growth trajectory and corresponding profits. Holden is a comparatively tiny regional market; smaller than GM Canada, it has its own regional tastes and probably needs the flexibility to pick and choose from the global portfolio to come up with a viable product portfolio. Opel is in a highly competitive market with high costs and no reasonable access to other markets. It's losing money and doesn't seem to have an underlying business structure (German unions, uncertainly around the UK's access to the rest of the EU) to be truly successful.

    Without Opel, Holden continues to take the buffet approach to the global GM portfolio. Buick development focuses on China, where the growth is and looks to get some additional high margin sales from the US. The only question: does GM become a EU importer? Canada has a EU trade deal and I believe the US also is part of that deal. Assuming the current amnistration sees it as meeting it's 'fair trade' requirements, perhaps the EU gets cars build elsewhere, trading lower sales for higher margins?


    Thats great that Buick sells 1 million units a year on its own. However, it would sell 2 million a year with Opel. That would lower engineering costs, etc overall just like One Ford has worked for Ford.
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