PSA Seeking Refund From GM Over Opel Acquisition
AutoVerdict - Nick Saporito - Nov 29, 2017
French automaker PSA Group is reportedly seeking a refund from General Motors against its acquisition the Opel and Vauxhall brands earlier this year. The request comes as PSA says it was misled regarding Opel’s position relating to meeting strict CO2 emissions regulations now and into the future.
The story, broken by Reuters, alleges that PSA is going to seek 600-800 million euros from GM, which is nearly half of the acquisition price the company paid for Opel back in July when the deal closed.
Thus far PSA Group has not filed a formal request with GM for the refund, but the grievances have been discussed by the two parties.
PSA’s allegations stem from what it says was misleading information regarding Opel’s emissions strategy going forward. By 2021 the European Union will implement a new emissions target of 95 grams per kilometer, down from today’s 130 grams. This significant reduction is the source of the feud, as PSA claims GM said Opel was going to be able to meet this target.
Upon further inspection of Opel’s plans after it took possession of the company this summer, PSA says that isn’t the case. Instead, Opel will miss the 2021 target and it says GM’s strategy for meeting it was under unrealistic assumptions. Specifically, the company was forecasting high sales of the Ampera-e, an all-electric vehicle based on the Chevrolet Bolt EV.
Failure to achieve the new emissions targets will subject the automaker to significant fines, which could be up to 1 billion euros if targets are missed by sizable amounts.
PSA’s realization regarding Opel emissions has caused the company to significantly rework its product strategy. The company says all Opel products will be replaced with its engines and technology by 2024, three years ahead of the original schedule. The company is also quickly working on electrified versions of the Opel Corsa, Garland X and Crossland X that were not originally planned.
PSA says these changes are costing them a lot of money, motivating them to pursue a possible refund from GM to help fund them.
A GM spokesman told Reuters PSA conducted a robust due diligence process prior to finalizing the deal. People familiar with the matter say GM did not allow Opel employees to talk to PSA during the deal, instead all due diligence requests were handled by GM headquarters in Detroit.
According to the actual acquisition contract, grievances such as this will have to go through arbitration if PSA opts to formalize their complaint. If any deal is reached during arbitration, GM will treat the payment as a refund of the deal for tax purposes.
Any refund on GM’s part will simply escalate an already high bill on the company’s European exit. GM has spent about $6 billion to shed Opel, $5.5 billion of which is in the form of writing down Opel from the books. GM also had to commit 3 billion euros into Opel’s pension fund as part of the deal.