After many months of speculation, General Motors and PSA confirmed today that German brand Opel, together with is U.K.-based Vauxhal Motors subsidiary, has been sold to the French company that produces Citroen and Peugeot. PSA will also purchase GM Financial's European operations in a transaction that's expected to be completed by the end of 2017.

GM will receive €1.32 billion ($1.4 billion as of March 2017) for Opel in the form of €650 million ($689 million) in cash and €670 million ($710 million) in PSA share warrants. An additional €900 million ($954 million) will be paid by PSA and BNP Paribas for Opel's financing arm, which will be operated by the French bank. The whole transaction is valued at €2.2 billion ($2.33 billion).

“We are proud to join forces with Opel/Vauxhall and are deeply committed to continuing to develop this great company and accelerating its turnaround,” said Carlos Tavares, chairman of the Managing Board of PSA. “We respect all that Opel/Vauxhall’s talented people have achieved as well as the company’s fine brands and strong heritage. We intend to manage PSA and Opel/Vauxhall capitalizing on their respective brand identities.

“For GM, this represents another major step in the ongoing work that is driving our improved performance and accelerating our momentum. We are reshaping our company and delivering consistent, record results for our owners through disciplined capital allocation to our higher-return investments in our core automotive business and in new technologies that are enabling us to lead the future of personal mobility," said GM chairman and CEO Mary T. Barra.

General Motors admitted that selling Opel to PSA will free up resources for better opportunities in North America and China, as well as enable the automaker to return cash to shareholders. GM also claims that the European market has become so different from the company's other major regions that only 20 percent of the vehicles in Opel’s lineup would have been shared with GM products. The company also expects the deal to free up around $2 billion in cash to use toward repurchasing its own shares. As a reminder, GM is in the middle of a buyback effort following its 2009 bankruptcy.

As far as its Buick and Holden brands are concerned, both sharing underpinnings with current Opel vehicles, the German carmaker will continue to provide parts. GM and PSA will also collaborate on electric car technology, so it's safe to assume that the American firm and Opel will continue to have solid ties. However, some Opel models will be restricted from entering new overseas markets, while GM will be similarly barred from selling similar technology in Europe. All told, should GM plan to return to Europe with Chevrolet, it will have to develop its own vehicles without technology from Opel/Vauxhall.

PSA, which has now surpassed Renault to become Europe's second-largest carmaker after Volkswagen, vowed to return Opel to profit after more than two decades of losses. Using the same strategy that saved PSA from going under, the French are targeting a two-percent profit by 2020 and six-percent profit by 2026. At the same time, PSA predicts joint cost savings of around €1.7 million ($1.8 million).

According to Tavares, the next-generation Opel Corsa will be the first vehicle to benefit from the new joint-venture. The subcompact will arrive in 2020.

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Why it Matters

While it's difficult to predict what will actually happen in the long term, I'm guessing that both GM and PSA did a thorough simulation of their futures without and with the Opel brand, respectively. And it's safe to assume that both parties are happy with what they think they can achieve this way.

For General Motors, the main benefit is no longer having to pour money into the bottomless pit that Opel and Vauxhall have been over the last years. Granted, the German brand seems to be on the right path and a turnover is indeed to be expected in a few years, but selling Opel is the right thing to do if GM wants to move on without having to worry about a new Chapter 11 bankruptcy. Investors have been asking GM to drop Opel and focus on more important projects and it seems that GM has given this a lot of thought. Sure, the American firm may no longer have a presence in Europe (outside Cadillac and the performance Chevy Camaro and Corvette duo), but focusing on North America and China, its largest markets as of now, makes a lot of sense.

As for PSA, buying Opel comes with loads of opportunities. For starters, the cooperation will spawn better cars that are cheaper to produce, meaning PSA will save a lot of money, while Opel could finally return to profit. This will also enhance PSA's presence in Europe and probably bring a solid management program for all the brands involved. On the flipside, should Opel remain unprofitable in the long run (which isn't very likely to be honest), PSA will take a big hit and could face bankruptcy again. In 2014, the French firm avoided it by selling 14 percent stakes to the French state and China's Dongfeng.

All told, it remains to be seen how this works out for all parts involved.