Published: Sun, March 05, 2017
Economy | By Melissa Porter

PSA to announce acquisition of Opel on Monday?

If a deal is reached, the acquisition of Opel will likely vault the French manufactures to the second place in Europe, next only to Volkswagen.

The tie-up was approved on Friday by the PSA supervisory board, on which the French government, Peugeot family and China's Dongfeng (0489.HK) are represented as shareholders, one source with knowledge of the matter said.

This reported deal would provide the PSA Group with a 16.3% share in the Europe's small vehicle market, making it the second largest European auto company, ahead of Renault SA, but behind Volkswagen.

Earlier this year GM reported a loss of $257m (£206m) from its European operations last year.

In their jointly issued invitation to a Paris press conference at 0815 GMT on Monday, PSA and GM gave no indication of its subject.

2016 was Opel's 16th consecutive year of losses, so it will be interesting to see what will happen to the Rüsselsheim-based marque in the years to come under PSA's umbrella.

Difficulties soon emerged, however, over the future of a near-$10 billion Opel pensions deficit and demands by GM that the brand be barred from competing overseas under PSA ownership against its own Chevrolet lineup.

PSA likely used a non-compete clause to help convince GM to pay more into the pension. Detroit-based GM, which came close to selling Opel to Magna (MG.TO) in 2009, has faced investor pressure to offload its struggling European arm and focus on raising profitability rather than chase the global sales crown now held by VW. "We are making progress every day", said another Paris-based source. Not only that, but he also believes PSA's decision to fully acquire Opel will bring savings of as much as €2 billion (about $2.1B).

PSA Groupe Chairman Carlos Tavares has been working feverishly since news of a possible deal was confirmed February 14 to convince politicians and union leaders that a combined company will not lead to job cuts.

PSA boss Carlos Tavares says buying Opel offers an "opportunity to create a European vehicle champion" and at the same time it will help the conglomerate sell more than five million cars each year.

PSA is considering the takeover to boost its scale, get access to Opel's engineering and electric-car technology as well as reap savings from joint purchasing and eventually cost cuts.

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