Financial Times reports that PSA Peugeot Citroën and General Motors are currently in “advanced talks” regarding a major alliance. According to reports, if the French and U.S. automakers are able to finalize an agreement, they will band together to produce both cars and automotive components in Europe.
Peugeot would align with Opel/Vauxhall
Should an agreement be reached between the two parties, Peugeot and GM’s Opel/Vauxhall unit would end up producing engines, transmission systems and whole vehicles that would be sold under their own respective brands, two sources close to the negotiations told Financial Times Tuesday.
No agreement has been signed by either party at this stage, but the continuation of talks has automotive industry experts speculating that an announcement could be ready as early as the beginning of the Geneva Motor Show on March 8.
Not a merger, but an exchange
A PSA Peugeot Citroën-General Motors team-up would not function as a corporate merger in the traditional sense. Reuters notes that an agreement between the automakers would instead be characterized by an exchange of shares of stock. Sources close to the situation confirmed this for the Financial Times. It is known that both Peugeot and GM have also courted other automakers in efforts to restore operations in Europe to profitable levels.
Months of deliberation
PSA Peugeot Citroën CEO Philippe Varin confirmed that talks between Peugeot and General Motors have been in progress for several months. During a January visit to GM’s Detroit headquarters, Varin noted that Peugeot was very interested in “potential co-operations and alliances” that would help it expand its globalization strategy. GM reportedly did not offer comment.
Beaten down by lack of demand
Both Peugeot-Citroën and GM’s Opel/Vauxhall line have struggled since the collapse of the global automotive industry. Slowed demand and rapidly growing inventory created brutal price wars that severely hampered profits.
Since 2009, when Thierry Peugeot announced that the automaker would be open to the right kind of partner, PSA Peugeot Citroën has been on the lookout for aid. The primarily stipulation is that the Peugeot family would remain the dominant shareholders.
Read the numbers and weep
Financial Times reports that Peugeot’s financials for the second half of 2011 were abysmal for the core automotive division. The division experienced a lost of $659 million during the half, and it burned through over $2.1 billion in cash last year as a whole.
General Motors’ Opel unit lost money in 2011 as well. A $747 million loss has prompted executives to draft new market strategy that will enable the automaker to run the division at a lower break-even point until the European market recovers.
Audi versus Peugeot at Le Mans
Geneva Motor Show: http://www.salon-auto.ch/en/