PSA Group's proposal to buy General Motors' Opel brand quickly ran into a potential hurdle in Germany, with politicians and labor leaders vowing to protect jobs and the unit's manufacturing footprint in the country.
"The company carries responsibility for the sites, the development center and the securing of employment," German Economy Minister Brigitte Zypries, a Social Democrat, said on Tuesday. "This is my clear expectation regarding General Motors."
Zypries called it "unacceptable" that GM discussed a possible Opel sale without first speaking with the works council, labor unions and the state government in Hesse, where Opel is based. The manufacturer has two plants in Germany and the future of jobs at the sites could become a topic in this year's federal election.
Germany’s IG Metall labor union and Opel's works council said they were caught by surprise with news of the potential sale of Opel to PSA, the maker of Peugeot and Citroen brand cars. Any such talks without their consent would be "an unprecedented violation of all German and European co-determination rights," the two said in a joint statement.
Hesse Prime Minister Volker Bouffier said earlier that he will seek talks with company management, with a view to securing jobs and keeping Opel's development center -- "the core, the most important part of Opel" -- in Ruesselsheim, outside Frankfurt.
"I can’t rule out that General Motors has made an assessment that they want to pull out of Europe," Bouffier said. While it's speculative, "it could also be that General Motors, with respect to the vision of the new American president, has decided to concentrate more on America and less on Europe."
Meanwhile the French government, which holds a stake of over 13 percent in PSA, said it supports PSA's plan but will watch out for the implications for French jobs.
"The government supports the management in its desire to reach critical mass (and) will give special attention to the impact in terms of jobs and the industrial impact of these initiatives," an economy ministry source said.
PSA and GM said on Tuesday they are in talks that could result in PSA buying GM's European auto operations.
It was not clear what price GM might want for the loss-making European business, or what structure a deal could take. Both companies cautioned in statements that no deal is certain.
For GM, selling Opel would be the most dramatic demonstration yet of CEO Mary Barra's strategy of putting profitability and returns on invested capital ahead of market share. Since taking over as GM's CEO in January 2014, Barra has signed off on decisions to quit markets, including Russia and Indonesia, where GM lost money, pull the Chevrolet brand out of Europe, and slash sales to rental car fleets that long propped up U.S. market share with little or no profit.
GM's global market share slipped by 0.3 percentage points last year. Selling Opel and Vauxhall, which added almost 1 million cars to its sales, could mean abandoning the global volume race in which it is currently ranked third behind Volkswagen and Toyota Motor, with just over 10 million vehicles delivered last year.
GM Europe has been a drag on the automaker's global profitability since 1999, the last year Opel and Vauxhall recorded a net profit. GM restructured its European operations over the past six years, shutting Opel factories in Belgium and Germany and withdrawing the Saab and Chevrolet brands from sale. Still, GM Europe failed to break even in 2016, as Barra had once promised it would, and the company said last week it did not expect profits in the operation until 2018.
Going forward, GM faces the prospect of heavy investments to comply with European government and consumer demands for cleaner diesel vehicles, and to catch up with a rapid shift toward SUVs.
GM had previously discussed a sale of its European auto business to Canadian parts maker Magna International in the aftermath of the financial crisis, when GM was heading toward a U.S. government-led bankruptcy. But GM pulled the plug on the tentative deal in 2009.
GM and PSA have already shared production of commercial vans and developed common vehicle platforms, a relic of their last attempt to forge a broader alliance, which was unwound in 2013 with the sale of the U.S. carmaker's stake in PSA.
It remains unclear how PSA would cut costs in a combined group. PSA has 10 factories in Europe and General Motors has 11 plants.
Under CEO Carlos Tavares, PSA has rebounded from a 2013-14 brush with bankruptcy to reach record levels of earnings, posting a 6.8 percent automotive operating margin in the first half of last year.
Bloomberg and Reuters contributed to this report