Pulling out of Europe allows the Detroit car maker to slash engineering costs and lower the amount of cash it needs to keep on hand

By Mike Colias and John D. Stoll
Updated March 6, 2017 7:20 p.m. ET

Carlos Tavares, CEO of PSA Group, center left, stands with Mary Barra, chairman and CEO of General Motors, center right, while speaking to the media following the news conference to announce the GM deal in Paris on Monday. Photographer: Christophe Morin/Bloomberg PHOTO: CHRISTOPHE MORIN/BLOOMBERG NEWS

General Motors Co. sent a message Monday with the sale of Adam Opel AG operation to Peugeot PUGOY -0.67% : Europe isn’t worth the trouble. And more markets could eventually get the same message from the Detroit auto maker.

GM’s exit from Opel and sister brand Vauxhall slashes engineering costs, lowers the amount of cash the company needs to keep on hand and simplifies its business. European buyers have fickle tastes and regulators have drawn up rules, factors that would have forced the auto maker to spend heavily to meet mandates and trends in a market of which it has only a 5.7% share.

Still, the sale is a rare vote of no-confidence in the continued globalization of auto making. Many industry executives have argued car companies need to get bigger to handle the costs of regulatory mandates around the world.

GM, in selling Opel and its finance arm for about €2.2 billion, adds to a series of retreats. In recent years, the auto maker pulled out of Russia and scaled back in Southeast Asia and Australia. Executives have said the scale of operations in India, Korea and Brazil are under review due to labor-cost pressures, political volatility or shaky economies.

“Clearly there’s a little more work we’re doing in the international markets that we’ve talked about at a high level,” GM Chief Executive Mary Barra said in a conference call Monday. “Our overall philosophy is every country, every market segment has to earn its cost of capital, has to be contributing. We’re going to keep working to achieve that, either by fixing or by taking a move like we did today.”

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To read the complete article, please visit wsj.com

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