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.