GENEVA -- PSA Group's purchase of General Motors' Opel/Vauxhall division will cause no immediate problems for Volkswagen's core autos division, which is undergoing major restructuring, VW CEO Matthias Mueller said.
PSA is buying Opel in a deal valuing GM's European arm at 2.2 billion euros ($2.33 billion), creating a new car giant in the region to challenge market leader VW.
"Opel and PSA will have had their reasons" for the transaction, Mueller told Reuters on the eve of the auto show here. "It has no influence on our plans initially. We have our own ideas and thoughts and will thoroughly work with them."
Asked whether the VW brand would face greater competitive pressures after PSA, by acquiring Opel, becomes Europe's second-ranked carmaker by sales, Mueller said: "We took Opel and PSA seriously as competitors in the past. These were two brands and now they're under a single roof. I don't believe that a great deal will change there."
The VW brand and PSA-Opel will be competing in a European market that analysts have said will become even tougher as emissions rules tighten, demand is near its peak and young customers turn to ride-hailing services rather than buying a car.
Meanwhile, the core VW brand will improve profitability and gain market share this year after posting stable operating results in 2016 thanks to cost cuts, brand chief Herbert Diess said.
The namesake brand, the group's largest by sales, is cutting thousands of jobs via natural attrition, streamlining development processes and reducing the number of parts to revive profitability which has been lagging rivals such as Toyota and PSA Group.
The brand last year cut fixed costs by about 300 million euros ($320 million) in Germany alone, destination of over 9 percent of global deliveries of 6 million cars, Diess said at a press conference on Monday at the Geneva auto show.
"Our work is already paying off. We have put ourselves in an excellent starting position for 2017," said Diess, who was known as a cost-cutter at BMW before he joined VW in 2015.
Despite progress on cost cuts, brand management and the carmaker's unions have been struggling to implement a cost-cutting plan dubbed future pact, designed to lift profitability. The brand accounts for nearly half of group sales but no more than 11 percent of its underlying earnings.
VW group swung back to record operating profit before special items last year, powered by record deliveries of high-margin Audi and Porsche models. Detailed results for its 12 brands are due for publication on March 14.