An alliance has been reached between General Motors and PSA Peugeot Citroën, creating a long-term and broad-scale global strategic partnership that will leverage the merged strengths and capacities of the two firms. This alliance is expected to raise their profitability as well as boost their competitiveness in Europe.
The purpose of this alliance is to share vehicle platforms, parts and modules, as well as form a global purchasing joint venture to source commodities, components and other goods and services from suppliers. This alliance will have combined yearly purchasing volumes of about $125 billion.
Each automaker will carry on with marketing and selling its models independently and will continue to be competitive. The alliance will also be flexible enough so that the automakers could consider other ways to cooperate. Under this alliance, PSA Peugeot Citroën aims to raise around €1 billion through a capital increase with preferential subscription rights for shareholders of PSA Peugeot Citroën.
This would be underwritten by a group of banks and will receive an investment from the Peugeot Family Group as proof that it is confident in the alliance’s success.
The deal doesn’t have a specific guideline about the governance of PSA Peugeot Citroën. In addition, GM intends to acquire a 7% equity stake in PSA Peugeot Citroën, which would make it the No. 2 biggest shareholder behind the Peugeot Family Group.
Dan Akerson, GM chairman and CEO, said that the partnership brings “tremendous opportunity” for the two firms. He added that the alliance synergies, when combined with its independent plans, would make GM poised to achieve a long-term sustainable profitability in Europe.