GM and PSA are in advanced talks about a possible alliance

Article by Christian A., on February 22, 2012

Talks of a possible alliance between General Motors and PSA Peugeot Citroen are in its advanced stages, a source told French online newspaper La Tribune. The report stated that these discussions, which began a few months ago, between PSA (Europe's No. 2 automaker) and GM will go farther than specific production partnerships of the sort that PSA already has with automakers like Ford Motor Co., Toyota Motor Corp. and BMW AG.

Neither GM nor PSA have commented on this issue. La Tribute said that the Peugeot family would still have to approve any agreement with GM before it could proceed.

The Peugeot family holds 30.9 percent of the French automaker's shares and 48.3 percent of voting rights. The source added that if a deal is reached, it’s likely that the announcement will be made during the Geneva motor show in early March.

Restructuring plans are being prepared by PSA and GM's European Opel division as an attempt to turn around losses that were aggravated by the region's declining auto market, overcapacity and intense competition on prices. In 2011, GM's European operations (which include the Opel brand) reported a $747 million loss.

This is an improvement over the 2010 loss of $1.76 billion but it’s still short of breaking even, which has been what GM had wanted to attain until November. GM has previously explored potential alliances with European automakers. GM rejected a partnership with Renault-Nissan in 2006. Kirk Kerkorian, who was a shareholder then, had led these talks.

GM made a $2-billion payment to end a five-year partnership with Italy's Fiat SpA in 2005. Last February 15, PSA revealed a series of cost cuts and had placed its lucrative Gefco logistics business for sale as it works hard to finance the overseas expansion it badly requires to lessen the dependence on its weakening home markets.

GM said in November 2011 in its attempt to put a stop to Opel’s losses in Europe, it may close down the plants and cut jobs. Chief Financial Officer Dan Ammann said during the presentation of GM's third-quarter results that when it comes to restructuring GM's European operations, nothing was "off the table" and this may include shutting down its plants. GM’s losses in Europe have dropped from $559 million to $292 million in the third quarter of 2010.

The continued loss prompted GM to back away from its full-year breakeven goal. Eventually, GM still posted loss in Europe in 2011 to the tuned of $747 million. For more than 10 years now, GM hasn’t generated an annual profit in Europe. 

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Topics: gm, psa

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