GM is no longer a major player in Europe after 88 years of losses / Mark Blinch / Reuters

General Motors completed the sale of its European division, which includes Opel and Vauxhall, to France's PSA Group on Tuesday. This means that GM will cease to be a major player in the European market after 88 years of losses for almost two decades. The deal between the American and French concerns was announced on March 6.

PSA Group buys Opel and Vauxhall for €2.2bn

Auto / Automotive industry

The sale of Opel is one of GM’s most significant moves to jettison unprofitable operations. Instead, the company wants to focus on its most profitable segments, such as its robust U.S. pickup truck business. In an interview, GM President Dan Ammann said the company is nearly done cutting geographies, which will likely leave the world’s top three automakers. “How much time have we spent over the last four or five years solving problems instead of looking for opportunities?” Ammann said, calling the exit from Europe “the biggest step yet” to sharpen the company’s growth plans. “We’re hoping that we can now spend the majority of our time and energy on driving growth.”

For Peugeot, buying such iconic brands as Opel and Vauxhall is a bold move. The company’s finances have only recently begun to recover. But CEO Carlos Tavares is betting that he can turn the brands around, as he did when he took over three years ago. “We are witnessing the birth of a true European giant,” Tavares said. “We will help Opel and Vauxhall become profitable again and we want to set new standards in the industry together.”

PSA promises to return Opel to profitability in three years

Auto / Automotive industry

Since Mary Barra took over as CEO in January 2014, GM has pulled out of several countries where it has sold cars for decades. The sale of Opel makes GM the only major automaker without a significant presence in Western Europe. GM has also abandoned India, Russia and other markets where rivals are betting on long-term growth. But the strategy has risks, analysts say. It makes the company more vulnerable to downturns in the U.S., China and Latin America, where GM is typically among the top two in sales.

GM has cited the brand’s deteriorating position in Europe, tighter regulatory requirements amid the Volkswagen diesel scandal and Brexit as the reason for its decision to sell Opel. The company says the move will save it about $1 billion a year to invest in more promising markets. Last week, Barra told analysts several projects that require additional resources. They include its U.S. pickup truck business, which accounts for a significant portion of GM’s global operating profit, and a push to improve the position of its luxury brand Cadillac. GM and other automakers also need to invest in self-driving cars, electric vehicles and other technologies that are unlikely to generate profits in the coming years.

The loss of Opel will reduce GM's annual sales by about 1.2 million vehicles, likely dropping the company from third to fourth place in that category, behind Volkswagen, Toyota and Renault-Nissan. GM executives have long prided themselves on being the world's largest automaker, but Ammann is unfazed by the loss of market share: "We've learned that we can't please everyone all the time."

Translated by Alexey Nevelsky

General Motors Leaves Europe