General Motors on Monday said it has agreed to sell its European business Opel for EUR2.2 billion ($2.33 billion), as the U.S.'s biggest auto maker withdraws from a region where it hasn't made money for almost two decades.
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Peugeot SA will pay EUR1.3 billion for GM's Opel and Vauxhall brands, the companies said Monday. GM's financial operations will be jointly acquired by Peugeot and BNP Paribas SA for about EUR900 million.
As part of the deal, GM will also get warrants to purchase 4.2% of Peugeot's capital. These options can be exercised starting five years after the issue date so GM won't become a shareholder in the French company immediately.
Unloading Opel, which sold its first vehicle at the end of the 19th century and now sells about 1 million vehicles a year in Europe, will knock GM's global volume down 10% and indicates Chief Executive Mary Barra has shelved any plans to re-enter the running for the crown as the world's largest car maker.
The plunge in the pound following the Brexit vote in the U.K., where Opel sells about 250,000 vehicles a year under the Vauxhall brand, torpedoed what had been an expected return to profit last year.
While it will lose volume, GM will get an immediate boost to its profit margin as Opel has failed to turn a profit since 1999 and has lost on average about $1 billion a year since then. Detroit rivals Ford Motor and Fiat Chrysler Automobiles have returned to the black in Europe recently.
For Peugeot Chief Executive Carlos Tavares, the acquisition is a daring move from an executive who has made a name for himself over the past three years at the helm of the French company as a cost-cutter more intent on squeezing out savings from existing operations than building volumes.
Mr. Tavares is betting that he can steer a successful turnaround at GM's European operations, similar to the project he put in place to bring Peugeot back from the edge of bankruptcy just four years ago. Mr. Tavares said last week that he could expand the Opel brand beyond its home region, and analysts have speculated that he could use it to make a push into the U.S. market.
Write to Nick Kostov at Nick.Kostov@wsj.com