GM and PSA Peugeot Citroen this evening announced a ‘long-term and broad-scale global strategic alliance’ which will see the three brands co-develop cars in Europe and, in some cases, globally.
Opel/Vauxhall and Peugeot Citroen will start sharing vehicle platforms and components, with the first jointly developed models expected by 2016. The focus will be on small and medium sized cars, MPVs and crossovers, but could in future stretch to include vans and commercial vehicles.
The news comes as both partners have been haemorrhaging money in Europe. On 15 February, PSA reported that its car-making divison had made an operating loss of €192 million in 2011.
Incredibly, GM Europe is said to have shed $14 billion since 1999. It’s a drain that Detroit – and Paris – just couldn’t continue to sanction.
How Opel/Vauxhall and Peugeot/Citroen will save money
Inevitably, it’s all to do with scale. Between them, this foursome have a combined spending power of around $125 billion. That’s some shopping list – enough to push suppliers for lower prices through higher volumes. It’s exactly the sort of efficiency of scale that Volkswagen has been producing.
PSA and GM will create a new global purchasing joint venture.
The cross holdings to back up the alliance
As reported earlier by CAR, GM will buy 7% of the equity of PSA, making it the second largest shareholder behind the Peugeot family. And PSA will raise a billion euros through a rights issue.
‘This partnership brings tremendous opportunity for our two companies,’ said Dan Akerson, GM chairman and CEO. ‘The alliance synergies in addition to our independent plans, position GM for long-term sustainable profitability in Europe.’
Philippe Varin, chairman of the managing board of PSA Peugeot Citroen, said: ‘This alliance is a tremendously exciting moment for both groups and this partnership is rich in its development potential. With the strong support of our historical shareholder and the arrival of a new and prestigious shareholder, the whole group is mobilized to reap the full benefit of this agreement.’
Today’s deal does not affect current deals, such as PSA’s cooperation with BMW on the 1.6-litre petrol engine.
How much money will the GM-PSA alliance save?
The total synergies expected from the alliance are estimated at approximately $2 billion annually within about five years, split evenly between General Motors and Peugeot Citroen.
PSA and GM are the latest to jump into bed. Manufacturers are increasingly looking at strategic tie-ups to shave costs from R&D and production. This deal mirrors that by Daimler and Renault-Nissan, which remain distinct companies but which benefit from working together to reduce their cost base.
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