Peugeot poised to buy GM's Opel, creating European vehicle giant

Peugeot poised to buy GM's Opel, creating European vehicle giant

Carlos Tavares, Renault's former COO turned Groupe PSA's CEO, has previously explained that purchasing Opel would give the French group the chance to become a "European auto champion", which could quickly exceed five million annual vehicle sales.

Media reports said Friday that the supervisory council of French automaker PSA had in principle approved the takeover of GM's European arm, that is the acquisition of Opel and Vauxhall. Spokesmen for PSA and Opel declined to comment.

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

PSA makes Peugeot and Citroen cars in Europe.

Opel managers adjourned a town hall meeting with workers until Monday morning, saying they could not yet discuss details of the proposed deal, Reuters said. Separate briefings for the German press and Opel unions are expected to be held the same day.

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It wasn't a smooth negotiation process as there were some bumps in the road regarding the roughly $10 billion in Opel pension liabilities and also about whether a PSA-owned Opel would be allowed to go up against Chevrolet in China and other markets.

But the "non-compete" issues were finally resolved as GM agreed to inject "substantially more" into the pensions than the $1 billion to $2 billion it had initially offered, another person said. 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. Two inside sources told Reuters that the deal will be formally announced on Monday.

PSA is optimistic that acquiring Opel will save the company about $2.1 billion.

PSA chairman Carlos Tavares last month said that he hopes to create a "European vehicle champion" with the combination and pledged to work with governments and unions that are anxious about job cuts. There was also the matter of potential job losses, but PSA has made the promise to "respect the existing agreements".

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