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Business

Peugeot Citroen in talks to buy GM's Opel brand

The French automaker has said that it is in talks to "expand existing projects" with the German car company. Rumors have been circulating for months that GM would try to launch another major bid to offload the brand.

A spokesman said on Tuesday that French carmaker PSA Peugeot Citroen had plans to buy the Opel car brand from General Motors (GM). The news follows years of GM trying to offload the beleaguered German manufacturer.

"We are in discussions with Opel to expand upon our existing projects," PSA representative Bertrand Blaise confirmed to Reuters news agency. PSA Peugeot Citroen and Opel had already entered an alliance in 2012, with each becoming minority stakeholders in each other's companies - partially with an eye to sharing design strategy.

GM also said there were talks between the two carmakers, adding  that "there can be no assurance that an agreement will be reached."

About two thirds of Opel’s 38,000 employees are based in Germany, where powerful labour unions make large-scale redundancies politically difficult. Little wonder that German politicians are are already complaining about the deal.

Economics Minister Brigitte Zypries said on Tuesday it was "unacceptable" that GM and PSA had not informed the Opel works council, the union IG Metall and the regional and federal government of their plans.

Elusive Opel profit

Detroit-based GM is weary of having to report losses year after year in Europe, where it last made a full-year profit in 1999 on a pre-tax basis. An outright sale would eliminate the losses. But GM relies on Opel for design work and uses Opel models as the basis for GM models in other markets.

Opel has struggled in large part because of GM's restrictions on it selling cars outside Europe. Last week, GM announced that Opel had suffered a loss of some $257 million (239 million euros) in 2016, meaning that the German carmaker failed for the 17th consecutive year to make a profit.

GM Chief Executive Mary Barra has underlined the company's commitment to Opel several times in recent years. But she expressed dissatisfaction with the unexpected loss last year. "We aren't satisfied with these results and the team is focused on mitigating the effect through further cost efficiencies," Barra said after the earnings update. And GM's Chief Financial Officer Chuck Stevens said the company expected only a "relatively flat performance" in Europe this year.

German auto industry expert Ferdinand Dudenhöffer said it was, therefore, only logical that GM was "exploring all options possible" to shed the loss-making entity.

"Whether it makes sense for Peugeot to buy Opel is a different issue. Peugeot and Opel overlap with their product ranges and both are based in Europe," he told DW. 

GM first tried to sell Opel to the Canadian-Russian consortium Magna in 2009, but the European Commission forced the auto giant to cancel the sale on legal grounds in October of that year.

Brighter future?

Combining PSA Group with Opel and its British brand Vauxhall would create the second-largest carmaker by market share in Europe, with 16.6 percent of sales according to 2016 figures. The combination would be second only to Volkswagen, with 23.9 percent, and would vault ahead of the Renault-Nissan alliance, which had 13.9 percent.

Being bigger can in theory bring per-vehicle cost advantages by spreading fixed costs such as investment in plants and equipment over a larger number of vehicles.

Efraim Levy, an analyst at CFRA Research, said "deeper integration or partnership" was better than an outright sale of Opel.

GM and PSA Group formed an alliance in 2012 in an attempt to make production more efficient. In late 2013, GM announced it was selling its stake, although the two companies continued working on joint vehicle projects. For instance, GM will make Citroen's forthcoming subcompact crossover vehicle beginning later this year at a plant in Zaragoza, Spain.

uhe/sri (AFP, Reuters, AP, dpa)