General Motors had a choice: Strive to achieve enough scale with its European operation to make headway in a hypercompetitive and increasingly costly market -- or leave that task to someone else.
After almost a decade of choosing the former with nothing to show for it, GM ultimately chose the latter, a final acknowledgment that -- just as many industry experts in Europe believe -- a regional power such as PSA Group might be more suited to run the business in the face of increasingly challenging odds.
The financial terms of the deal suggest it wasn't an agonizing decision. The $2.3 billion GM will collect, plus warrants for PSA shares, won't even cover the $3.18 billion GM must pay to PSA to top up Opel's underfunded German pension obligations, let alone the $4 billion to $4.5 billion in largely noncash charges related to the transaction.
The sale puts an end to 17 straight years of red ink spilled by GM's European operations, $257 million of which was booked last year because of Brexit-related currency headwinds from a tumbling British pound.
GM President Dan Ammann said it was a "pretty natural evolution" after realizing further investments wouldn't solve Opel's growing cost problems and regulatory burdens.
"Anytime that we're making long-term investment decisions, we need to look at the environment we're investing into," he told Automotive News. "Clearly the environment [in Europe] looks quite challenging for the near to medium term, so that's a factor, but I think the bigger factor was more the investment required to be as competitive as we want to be here off a relatively subscale position."
What's to say PSA can do better?
Experience suggests that the capital-intensive auto business, with its long product life cycles, is always a poor fit with a corporate culture driven by the U.S. stock market. GM, for its part, is more exposed to the vagaries of Wall Street than other peers as it remains one of the few carmakers without an anchor investor backing the company.