PSA Wants Half the Money it Paid for Opel Back from GM

PSA Group wants roughly half of the 1.3 billion euros it paid to GM for its European Opel brand back, according to a report from Reuters. The French automaker believes it was misled about the brand’s European Union emissions compliance for 2021 when it bought Opel back in July of this year.

Reuters cites multiple unnamed sources with knowledge of the dispute, one of whom says PSA is seeking 600-800 million euros. PSA will reportedly pursue a legal claim to recover money it feels it is owed.

The issue revolves around Opel’s brand-wide carbon emissions targets. By 2021, the EU will require all automakers to reduce their CO2 emissions to an average of 95 grams per kilometer, down from 130 grams currently. Sources say Opel will miss that target by more than 10 grams, which would equate to nearly 1 billion euros in fines over the next few years. Prior to the sale, Opel was on track to miss the target by only 3.7 grams, according to a November 2016 PA Consulting study. The fine is 95 euros per vehicle, per excess gram of CO2.

PSA CEO Carlos Tavares hinted that the company believed it was misled during a press conference earlier this month

“We became aware a few weeks after we finalized the closing that the company was going to the wall on CO2 emissions,” Tavares told reporters at the time. “We put our teams to work to completely rebuild the product and technology strategies. If you fail to comply [with EU rules] the weight of fines you are hit with can threaten the company’s existence.”

At that same press conference, Tavares revealed plans to revamp the Opel lineup and switch models over to its own platforms and drivetrains three years ahead of schedule. Sources say GM’s Opel plan relied too heavily on sales of the Ampera-e, Europe’s version of the Chevrolet Bolt. Because the car is manufactured alongside the Bolt in North America, losses on imported Ampera-e electric cars amounted to nearly 10,000 euros per vehicle, according to two sources. GM’s EU emissions solution was “economically unviable and would have led to enormous losses,” according to one of the people. PSA has suspended Norwegian sales of the Opel Ampera-e and increased prices by as much as 5,700 euros in the parts of Europe where it is still sold, likely in an attempt to curb losses. Under GM, the Opel Ampera-e was projected to sell 20,000 units annually. Removing that model from the equation is one contributing factor to Opel overshooting its emissions target.

But GM and others believe PSA didn’t do its homework before closing the deal.

“PSA undertook a robust due diligence process including their employees and many experts and lawyers,” GM spokesman David Caldwell told Reuters. “We provided them with substantial information.”

At the time the sale was proposed, GM CEO Mary Barra cited “increasing regulatory and compliance costs” as a primary reason for selling Opel. But even if GM itself didn’t openly admit to Opel’s challenges, analysts and other industry experts have noted the brand’s regulatory shortcomings in the past.

“We’ve been reporting for years that Opel/Vauxhall would have significant problems meeting the CO2 targets as GM brands in Europe,” Thomas Goettle, head of automotive for PA Consulting Group, told Reuters. “Opel is five to seven years behind with their engine lineup. We haven’t seen any big GM investments in Opel to develop plug-in hybrids or zero-emissions cars.”

With that said, it may be difficult for PSA to convince an arbitration panel that it wasn’t aware of Opel’s emissions woes.

Still, PSA sources believe the company has a strong enough case to argue it was misled.

“People who had worked on the closing realized quite quickly that there were these big discrepancies,” one source said. “They had been swept under the rug.”

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