General Motors, a subsidiary of Opel is in negotiation with Peugeot Citroen to sell off its shares for USD 2 billion after losing the sum of USD20 billion since it started business.
General Motors is strongly considering the sale after making billions of dollars in losses since the start of the century, General Motors may be ready to off load Opel to French automaker PSA Group.The last time General Motors made a profit in Europe was the 20th century.
GM’s European division which produces Opel and Vauxhall-branded cars has lost money every year since 2000. Over those 17 years, the losses add up to a whopping USD20 billion.
Despite European car sales at a nine-year high, automakers have struggled to make a profit. Detroit-based GM has accumulated more than USD15 billion of losses at its Opel arm since 2000 but has held onto its European operations to allow it to develop compact cars and diesel engines.
“General Motors have not made money in Europe for many years, it’s a drain on free cash flow and with the European (car) sales above 15 million (units) now you’d argue we’re at least three-quarters of the way through the cycle” George Galliers, autos analyst at Evercore ISI, told CNBC.
“Valuing GM is extremely difficult, given the entity’s struggle to make money over the years. It does not seem unreasonable to assume that GM might actually contribute money (pay) to dispose of the asset,” Evercore said in a note.
Excluding pensions and other liabilities estimated to be in the region of USD10 billion “and if we equated a sale price of PSA paying up to USD1 billion to GM, it would be the equivalent of 6-8 times the potential earnings of a restructured GME.”