Opel/Vauxhall to merge with Peugeot-Citroen?

Article by Christian A., on October 13, 2012

There may be a merging between Vauxhall-Opel, the European division of General Motors, with Peugeot-Citroen, according to media reports from France. The reports indicate that Vauxhall-Opel could merge into a new joint venture company with Peugeot-Citroen. GM, which would put in £6.2 billion for future product development, would own a 30% stake in the joint venture.

Automotive News Europe reported that this tentative plan is just one of several ideas being examined by the management teams of PSA and GM. One of the plans is to sell Opel outright to PSA. Another is that GM will buy PSA’s automotive division. No comments have come from either GM or PSA.

Currently, the alliance between GM Europe and PSA is focused on a variety of future models such as replacements for the Insignia and C5/408, a model to compete with Renault’s budget Dacia range, a super-economy supermini and a series of compact SUVs. There are some who think that the French Government won’t like the idea of a PSA-GME joint-venture.

The deciding factors may be the presence of a 70% controlling stake for the French and the fact that this agreement could be the only way to save PSA from disintegrating in the medium term.

Increasing losses have been recorded by GM Europe and PSA due to the downturn in the European market. This situation is worsened by plants that are operating below capacity and the need to reduce showroom prices. It’s estimated that GM Europe will lose almost one £1bn in 2012, having an adverse effect on GM’s global health.

It’s believed that PSA is burning through £161 million in cash monthly. Eventually, merging the four mass-market brands would pay dividends by permitting them to produce more cars on each platform, saving more money on product development costs and by operating the JV factories with a capacity of higher than 85%.

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