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Here's Why General Motors (GM) Stock Is Gaining Today

Shares of General Motors GM opened nearly 3.5% higher on Tuesday morning after new reports indicated that the auto manufacturer is discussing the sale of its European operations to Peugeot-maker PSA Group.

In a statement addressing the talks, General Motors said that it was considering a number of "strategic initiatives" to boost profitability and efficiency, including a sale of its Opel brand to PSA. GM also operates the Vauxhall brand in Europe.

The Detroit-based carmaker has repeatedly struggled to turn a profit on its European businesses, which has resulted in some shareholder pushback. Just last week, the company reported solid fourth-quarter earnings results, but its stock performance was held back after GM admitted that it does not expect to turn a profit in Europe this year.

(Also Read: Here's Why General Motors Stock Fell After Earnings )

For PSA, the sale would provide a unique opportunity to snatch up market share in the continent, and a takeover by an existing European auto-powerhouse may be exactly what a brand like Opel needs to start being profitable.

While the opportunity is exciting for both companies, General Motors is already feeling some backlash from its unionized employees. Opel's trade union IG Metall remains one of the strongest labor groups in Europe, and officials were already irate about the discussions before either company could even confirm their interest today.

"If it is true that GM and PSA held talks with the aim of selling Opel/Vauxhall, it would be an unprecedented breach of all German and European co-determination rights," said IG Metall and Opel's works council in a statement.

The French government and the Peugeot family are also factors here, as both entities own about 14% of the company each.

A concession of Opel, Vauxhall, or both would mean a temporary forfeit by GM in the global vehicle delivery race. The two brands contributed to about 1 million of the manufacturer's worldwide sales of 10 million cars last year. Currently, GM falls just behind Volkswagen VLKAY and Toyota TM .

Nevertheless, a refined focus would mean new opportunities in North America. With the battle to perfect electric and self-driving cars raging strong, any chance to invest in research and development could prove useful for GM in the long-term.

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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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