General Motors Co. has initiated plans to execute the sale of Vauxhall and European Opel units to PSA Group of France. General Motors Co. had been struggling to finish this sale for quite some time now. The sale was finalized for a sum of 2 billion dollars. The announcement was made on Monday morning at an event that took place in Paris.
The deal involves GM carving out some part of the auto-lending unit it has and will be selling it to Citroen and Peugeot vehicle makers. In addition to this, GM will dedicate 6 billion dollars out of the total 8 billion dollars to the pension liabilities that are unfunded. The terms of this deal have not been disclosed as of now. The majority of the payment, which PSA will be making, is cash and the rest of the amount will be in the form of PSA stocks warrants.
This deal is very significant for both PSA as well as GM. This deal will result in the exit of Mary Barra, the Chief Executive Officer of GM after the company lost about 9 million dollars after bankruptcy it had undergone in the year 2009. As far as PSA is concerned, it will provide an opportunity for Carlos Tavares, the CEO to collaborate with the second biggest carmaker in the entire Europe. The management as well as the boards of both the companies will be meeting at a press conference to be held in Paris and will be discussing the future objectives and working methodologies together.
Sources have revealed that the liabilities of pension are likely to be split because GM wants to provide compensation to all the retired workers. On the other hand, PSA says that the capital of 3 billion dollars will be covering the future pensions of all its employees. To assist in this ideology, GM will invest a sum slightly less than 500 million dollars to the active-worker fund for pension. PSA will also be acquiring the European portion of the auto finance unit of GM in order to finance the purchases of customers when it comes to the cars of Vauxhall and Opel.
GM will receive warrants for 9 years, which the automaker is not capable of liquidating for the next 5 years. This will strengthen the bond between PSA and GM. Officials of both the companies have said that the two companies will be sharing their engineering capabilities, resources, and technologies to ensure smooth transition.
PSA is said to get 2 billion dollars as saving by reducing the production costs and the costs incurred while sharing parts amongst the GM cars and PSA’s Peugeot and Citroen models.