General Motors, Peugeot agree to deal that saves $2 billion annually

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Artist's rendition of the General Motors logo.

General Motors' Opel unit will partner with PSA Peugeot Citroën. (Public Domain/CoolKid1993/Wikipedia)

Sagging automotive sales in the European market have led General Motors’ Opel unit and PSA Peugeot Citroën into an alliance, reports Automotive News. The automakers expect the partnership to save them $2 billion annually within five years, while increasing sales numbers. Officials representing General Motors told analysts Wednesday that the deal with Peugeot is expected to be finalized by the second half of 2012.

General Motors celebrates ‘a tremendous opportunity’

General Motors CEO Dan Akerson said in a media statement that the joining of Peugeot/Citroën and GM is “a tremendous opportunity” and the first major partnership since GM emerged from bankruptcy in 2009. Plans of the agreement were announced after the close of the European market on Tuesday.

“The alliance synergies, in addition to our independent plans, position GM for long-term sustainable profitability in Europe,” he said.

As a result of the now officially approved partnership, GM will claim 7 percent of Peugeot stock. Research and development, vehicle platforms and related technologies will be pooled between the two automakers. GM expects to spend as much as $470 million for the stake in Peugeot, although this will vary depending upon market conditions when terms of rights offering are met.

Pillars of the partnership

According to Akerson’s statement, the alliance between General Motors and PSA Peugeot Citroën is structured around two central point:

  1. Sharing vehicle platforms, components and associated modules.
  2. Creating a global purchasing joint venture in which commodities, components and related goods and services from suppliers will combine into a single annual purchasing pool of approximately $125 billion.

“Each company will continue to market and sell its vehicles independently and on a competitive basis,” the GM corporate statement read.

The primary sales focus during the GM and PSA Peugeot Citroën alliance will be small and midsized vehicles, MPVs and crossovers, reports indicate. In addition, a common platform will be developed for the production of low-emission cars, the first of such models expected to launch by 2016.

[Your Mazda Valparaiso dealer also offers low-emission vehicles.]

Fighting slow sales and overcapacity

The impetus of the General Motors partnership with PSA Peugeot Citroën has been slow sales and an overcapacity of inventory units in the European market. Critics of the partnership have been many.

“This is not the type of solution we need to see in the European mass market, where capacity has to leave,” Credit Suisse analyst Erich Hauser told European auto industry investors via a written release.

GM in the European theater

The partnership with Peugeot does not mark the first time General Motors has teamed up with a European company. In 2005, the automaker bought out Fiat to officially end a failed alliance of five years. That cost GM $2 billion. Peugeot has been somewhat more successful with European alliances, which include building commercial vans with Fiat and engines with BMW AG, notes Automotive News.

GM to buy ‘small stake’ in Peugeot

Sources

Automotive News

The Detroit News

Reuters

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