PARIS, Feb 23 — PSA Group’s earnings jumped 18 per cent last year, underscoring the French carmaker’s revival and buoying its efforts to buy General Motors Co’s struggling European operations.

"We are ready to grab opportunities” after accumulating €8 billion (RM37.57 billion) of free cash flow since the end of 2013, Chief Financial Officer Jean-Baptiste de Chatillon said today on a conference call. PSA can now "deploy this cash to make profitable investments and invest this money in the best interest of our shareholders.”

Three years after the French state and Chinese automaker Dongfeng Motor Co bailed out PSA following heavy losses, the maker of Peugeot, Citroen and DS cars is looking to acquire GM’s unprofitable Opel unit. Chief Executive Officer Carlos Tavares is on a mission to gain support for the deal, pledging to government and labor leaders that he can secure jobs by spearheading a similar turnaround at Ruesselsheim, Germany-based Opel and its sister UK brand Vauxhall. Chatillon said there’s no certainty a deal will be reached, declining to comment further on talks.

Recurring operating income climbed to 3.24 billion euros in 2016 from €2.73 billion a year earlier on cost reductions, Paris-based PSA said in a statement. Automotive operating profit widened to 6 per cent of sales from 5 per cent. PSA generated €2.7 billion of operating free cash flow in 2016, raising its net automotive financial position to €6.81 billion at the end of December from €4.56 billion a year earlier.

Market ranking

Picking up GM’s European operations, which are potentially valued at about US$2 billion (RM8.91 billion), would propel PSA back to second place in Europe’s car market, behind  Volkswagen AG. PSA’s deliveries in the region slid last year, partly because of Tavares’s decision to revamp the Peugeot and Citroen nameplates and focus on fewer, more lucrative vehicles. Volume is critical in the mass-market car segment, and the addition of Opel’s roughly 1.2 million in annual deliveries would help PSA spread the cost of developing autonomous cars and cleaner engines across a larger number of vehicles.

The carmaker increased its automotive recurring operating-margin goal in the 2016-2018 period to an average 4.5 per cent of revenue from 4 per cent. It reiterated plans for the figure to reach 6 per cent by 2021 and for sales at constant exchange rates to jump 10 per cent by 2018 from the 2015 figure, and another 15 per cent by 2021. Car markets this year will be stable in Europe, Latin America and Russia and expand 5 per cent in China, the company said.

While PSA returned to profit at an operating level in 2014 after three years of losses, GM’s European division has posted more than US$20 billion in deficits since 1999. The companies’ combined 16.3 per cent market share in Europe last year compares with Renault’s 10.1 per cent and Volkswagen’s 24.1 per cent.

An agreement with Detroit-based GM would give the French manufacturer, which also sells vehicles in the Middle East, Africa, South America and Asia, momentum to pursue its expansion abroad, PSA Chairman Louis Gallois said Tuesday. PSA is also bidding for a stake in Malaysia’s Proton Holdings Bhd, the owner of British sports car brand Lotus and another money-losing carmaker. It’s seeking to return to Iran and struck an agreement in January to produce cars in India. — Bloomberg