General Motors Eyes Selling Opel To PSA As Rumors Of European Exit Persist

Feb 17, 2017 05:02 AM EST | Yen Palec

General Motors has recently hinted that it is looking into the possibility of leaving the European market. If this happens, General Motors will offload its Opel unit to PSA group, the maker of Peugeot and Citroen cars, for $1 billion.

Many market analysts predict that should this deal push through, it will create Europe's second-largest car manufacturer, second only to Volkswagen. Furthermore, it can even challenge the current market leader as Volkswagen is rocked because of the fallout of the emissions scandal. If the deal pushes through, General Motors will lose its major market presence in the European market for the first time in 90 years.

Statistics reveal that European car sales are at a nine-year high. However, General Motors has posted more than $15 billion in losses at its Open division since 2000. Despite this, General Motors decided to hold on and continue to develop diesel engines and compact cars, a move that might have affected its market because of the decline in demand for diesel engines and cars.

"While G.M. has ambitious long-term plans for Europe, we currently see the business as mediocre at best," Barclays analyst Brian Johnson said in a statement acquired by the New York Times, "Why not sell now, when Europe is steadier, versus trying to sell at a time when the market is in a downturn."

There are also speculations claiming that part of what pushed General Motors to leave the European market is Britain's decision to leave the Union. General Motors described Britain's decision as a "speed bump" which has a significant negative impact on the company's effort of stabilizing its European market, according to CNBC.

Opel was once a mighty brand in the European market and was even considered as a serious rival to Volkswagen. However, the brand started losing its market share in the 1990's while Volkswagen continued its meteoric rise.

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