General Motors in Talks to Sell Opel Business to PSA Group

General Motors CompanyGM is in talks with France's PSA Group to sell its underperforming European business - Opel. Notably, PSA Group mainly manufactures Peugeot and Citroen cars. PSA Group and General Motors have collaboratively worked on several projects in Europe. Meanwhile, PSA Group has been undertaking several initiatives to improve profitability and operational efficiency.

The General Motors Opel division includes the British Vauxhall brand. However, the automaker has been finding it difficult to boost profits at the Opel unit. In 2009, the company had planned to vend the division to Canada's Magna.

General Motors has been incurring losses in Europe for quite some time. It recorded full-year profits in 1999 on a pre-tax basis. The sale of the Opel business will bring down the losses for the company to a certain extent. Meanwhile, Opel provides design work and General Motors uses Opel models as the base for GM models in other markets.

After the acquisition, PSA Group will have a 16.6% market share in Europe. Thus, it will be the second auto giant in the continent after Volkswagen Aktiengesellschaft's VLKAY 23.9% share.

Expansion of operation size will provide per capita cost advantage as the fixed costs will be distributed. Further, in order to reduce costs, PSA Group may eliminate overlapping models. However, the union leader will demand security of German factories and workers.

General Motors Company Price

General Motors Company Price | General Motors Company Quote

Price Performance

General Motors underperformed the Zacks categorized Automotive-Domestic industry over the last three months. Share price of the company increased 11.9% over the period while the industry saw a 16.6% increase. The company has been facing the brunt of decreased vehicles sales in the U.S. in 2016 and a large number of recalls.

Zacks Rank & Other Key Picks

General Motors currently carries a Zacks Rank #2 (Buy).

Other favorably ranked companies in the auto space include Honda Motor Co., Ltd. HMC and Fox Factory Holding Corp FOXF . Both the stocks carry a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Honda has an expected earnings growth rate of around 27% for the current year. Meanwhile, Fox Factory has an expected earnings growth rate of around 16.6% for the current year.

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Fox Factory Holding Corp. (FOXF): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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