Any doubt that General Motors (GM) saw little future for its European operations was dispelled Monday when the U.S. automaker agreed to swallow a $4 billion to $4.5 billion write down on its Opel and Vauxhall businesses to secure a sale to France's PSA Peugeot SA (PEUGF) .
GM will receive a total €2.2 billion ($2.4 billion) for its European operations, including €1.3 billion for the car brands and €900 million for the financing division, with the latter deal shared equally between PSA and French lender BNP Paribas.
"This was a difficult decision for General Motors," Chairman and CEO Mary Barra told a press conference on Monday morning. "It was a very carefully thought out plan that took into account the changing (political and regulatory) landscape."
Barra and her European team have spent years trying to turn around Opel/Vauxhall without success. GM's CEO insisted Monday that the business would have been profitable in 2016 had it not been for Britain's decision to leave the European Union. The so-called Brexit vote led to a sharp decline in the value of the pound, undercutting Vauxhall revenues and hiking the cost of imported parts used in its British factories.
GM's non-cash charge on the deal will likely be booked this year, with the sale of the European business expected to close in the final quarter of the year. GM will also pay PSA €3 billion to cover the cost of settlement of some of Opel/Vauxhall's pension funds, which will be transferred to the new owner.