Talks between General Motors and alliance partner PSA Peugeot Citroen about entering a deeper relationship have stopped due to concerns related to the declining finances of the French automaker and the implications of the government-supported bailout, according to sources. Last February, the companies announced that they’ve agreed to an operational partnership.
The two parties had also started to explore a full merging of Peugeot with GM's European unit Opel, which is headquartered in Germany. Two sources said that the discussions were stopped after Peugeot last month agreed to a state guarantee for its lending arm. Another factor was Peugeot’s revelation that its cash position had weakened further.
One source said that the automakers agreed to hit ‘pause’ on the early-stage discussions about a Peugeot-Opel agreement. He added that the plan is suffering due to the government bailout. Another source said that it’s highly unlikely for a deeper tie-up to take place before 2014, which is when the market is predicted to improve.
This is because under the government bailout conditions, there won’t be French job cuts and so it would be “politically impossible” for all the job losses to be limited to Germany.
According to a Peugeot spokesman, there are no ongoing Opel tie-up talks. He declined to divulge if there were previous discussions. GM has yet to comment on the issue. Operating the plants of Peugeot and Opel in France and Germany costs a lot of money and they’re exposed to struggling southern markets. This is why they are much affected by the slowed demand in European auto sales and the resulting surplus capacity.