More precisely, it wants back about $700 million.
According to a Reuters report, PSA Group is demanding GM refund about half of the 1.3 billion euros it paid to buy Opel and Vauxhall last July. PSA Group, which includes Peugeot and Citroen, is claiming the Detroit automaker failed to disclose the full extent to which Opel and Vauxhall vehicles would miss the mark to comply with the European Union emissions compliance for 2021. In short, PSA believes GM misled it regarding the issue of emissions and now it seeks to recover money it believes it is owed.
You see, by 2021 the EU will require all automakers to reduce C02 emissions to an average of just 95 grams per kilometer, which is down from the current 130 grams. Since the completion of the sale, PSA has realized Opel will miss the goal by more than 10 grams. Doesn’t sound like a big deal? Well, how does about 1 billion euros in fines sound to you? We didn’t think so, and neither does PSA. Before buying Opel and its sister brand Vauxhall, PSA was on track to narrowly miss that EU target by only 3.7 grams. The fine for that was a far more reasonable 95 euros per vehicle, per excess gram of C02. PSA realized it had a problem a few weeks after the sale was completed.
“We put our teams to work to completely rebuild the product and technology strategies,” stated PSA Group CEO Carlos Tavares. “If you fail to comply (with EU rules) the weight of fines you are hit with can threaten the company’s existence.” To combat this, Tavares announced plans to switch Opel models over to its own drivetrains and platforms three years earlier than planned. But what about the Ampera-E, Opel’s rebadged version of the Chevrolet Bolt? Wouldn’t that be beneficial to have? Yes, but here’s the problem: because it’s built alongside the Bolt in the US, PSA will lose about 10,000 euros per vehicle due to losses on imported vehicles.
GM’s plan also over estimated Ampera-E sales (20,000 units annually), so PSA has since stopped sales in Norway and jacked up the price tag by as much as 5,700 euros in other parts of Europe to recover some losses. The Ampera-E not meeting its sales projections is another way Opel will overshoot its emissions targets. Now, you may be wondering why PSA Group did not figure this out before finalizing the deal. Why didn’t it do its homework? “PSA undertook a robust due diligence process including their employees and many experts and lawyers,” GM spokesman David Caldwell told Reuters. “We provided them with substantial information.”
More specifically, GM has “been reporting for years that Opel/Vauxhall would have significant problems meeting the C02 targets as GM brand sin Europe,” said Thomas Goettle, head of automotive for PA Consulting Group. “Opel is five to seven years behind with their engine lineup. We haven’t seen any big GM investments in Opel to develop plug-in hybrids or zero-emissions cars.” Because of that, PSA may have a tough time convincing a judge or arbitrator it was wronged. However, PSA still believes it has a case that it was misled.