General Motors shareholders might well be dancing in the streets today after news it had finally managed to dump its chronic, perpetual loss maker Opel-Vauxhall on France’s PSA Group.

Opel-Vauxhall has lost about $18 billion this century while promising it will start to make money, but always next year.

PSA agreed Monday to buy Opel-Vauxhall from General Motors in a deal valuing the business at 2.2 billion euros ($2.3 billion).

The maker of Peugeot, Citroen and DS cars said it would return Opel and its British Vauxhall brand to profit, with an operating margin of 2% within three years and 6% by 2026 underpinned with 1.7 billion euros ($1.8 billion) in joint cost savings.

PSA Chief Executive Carlos Tavares said in a statement issued by the two carmakers on Monday.

GM will be saying good luck with that plan.

Last year was apparently the final straw for GM, when the latest promise that Opel Vauxhall would break even fell short again, but this time because it was hit by a big foreign exchange loss after Britain voted to leave the European Union. Opel-Vauxhall lost $257 million in 2016, blaming Britain’s Brexit vote for $500 million in foreign exchange losses.

GM management in the U.S. were probably wondering how the company failed to hedge against possible foreign currency losses, and would have noted Ford Europe, long a loss maker too but not on the scale of Opel Vauxhall, made a profit of $1 billion in 2016.

The combined PSA-Opel-Vauxhall will now be the second biggest car maker in Western Europe with a market share of over 16%, jumping over compatriot Renault and compared with the leader Volkswagen’s 24%.

GM will receive 1.32 billion euros ($1.4 billion) for the Opel manufacturing business.

PSA and BNP Paribas will pay a further 900 million euros for the Opel financing arm and operate it as a joint venture, fully consolidated by the French bank.

PSA and Opel-Vauxhall already share some production in an existing European alliance. The transaction also sees GM retain most of Opel’s pensions deficit, estimated by analysts at $10 billion.

GM will also take an accounting charge of $4 billion to $4.5 billion in relation to the deal, expected to close in late 2017.

This wasn’t on the cards less than 2 years ago. In September 2015 at the Frankfurt Car Show GM CEO Mary Barra declared Opel-Vauxhall an important resource. She was asked at a press conference, given that Opel-Vauxhall had lost $18 billion since 1999, why hang on to it.

“Europe is an important market and a leader in technology. We need to be present in Europe and win in Europe. Not only will (Opel-Vauxhall) break-even next year, but the 2022 plan stands too,” Barra said.

Peugeot has fought back from was the brink of bankruptcy and was saved by a 3 billion euro ($3.2 billion) state-backed rescue plan after racking up more than 7 billion euros ($7.4 billion) in losses over a couple of years. France and Chinese carmaker Dongfeng each bought 14% of the company in 2014. The Peugeot family stake was reduced to 14%.

But new CEO Carlos Tavares led a fast revival of the company’s profitability. Tavares has expressed the long term ambition to return Peugeot to the U.S. market.

Analysts initially said the terms of the deal look good for PSA.

Philippe Houchois, analyst with investment researcher Jeffries said Acquisition terms look better than expected for PSA, with a price of 1.8 billion euros and assumption of a fully funded German pension obligation. GM agreed to retain most of the pension obligations, he said.

But if the deal looks expensive in the short-term for GM, it will have at least finally shed a chronic loss maker.

This article was sourced from http://newsxlyngsat.com