Peugeot in talks to buy Opel from General Motors

General Motors and French automaker PSA Group said on Tuesday they are in talks that could result in PSA buying GM's European auto operations in a move that could shake up the global auto industry.

For PSA, owner of the Peugeot, Citroën and DS brands, acquiring GM's Opel and Vauxhall brands would give it a 16.3 per cent share of the European passenger car market, vaulting it into second place in the region, ahead of French rival Renault and behind Germany's Volkswagen.

Any deal would have to overcome financial, industrial and political obstacles. Germany’s industrial union IG Metall on Tuesday fired a warning shot, saying that if the companies were discussing the sale of Opel without the union’s involvement, that would be an “an unprecedented breach of all German and European co-determination rights”.

German economy minister Brigitte Zypries said it was totally unacceptable that talks took place on French carmaker PSA Group buying GM’s European Opel unit without consulting German works councils or local government.

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The French government, which owns 14 per cent of PSA, could support a deal that would help PSA reach “critical mass”, an economy ministry source told Reuters. The government will “give special attention to the impact in terms of jobs and the industrial impact of these initiatives”, the source said. France is in the midst of a heated national election campaign.

A spokesman for the Peugeot family, which holds a matching stake in the carmaker, was not immediately available.

It was not clear what price GM might want for the loss-making European business, or what structure a deal could take. Both companies cautioned in statements that no deal is certain, but investors cheered the disclosure, sending shares in PSA up 3.7 per cent and boosting GM shares by 3.5 per cent in early New York trading. Shares in Fiat Chrysler Automobiles rose 3.9 per cent as investors speculated that one consolidation play could lead to another.

Fiat Chrysler Chief Executive Sergio Marchionne has campaigned for more than a year for GM to combine with his company.

For GM, selling Opel would be the most dramatic demonstration yet of chief executive Mary Barra’s strategy of putting profitability and returns on invested capital ahead of market share. Since taking over as GM’s CEO in January 2014, Barra has signed off on decisions to quit markets, including Russia and Indonesia, where GM lost money, pull the Chevrolet brand out of Europe, and slash sales to rental car fleets that long propped up US market share with little or no profit. GM’s global market share slipped by 0.3 percentage points last year. – Reuters