GM Talks Production Deal With PSA Peugeot Citroen: Report

February 22, 2012
If politics can lead to strange bedfellows, so can the business of manufacturing automobiles. Even established brands must fight for an ever-increasing share of the market, competing against rival automakers, changing economic conditions and a potentially fickle buying public.

It’s no secret that General Motors, the world’s largest automaker, is struggling with its European brand, Opel. Opel is facing restructuring to cut losses caused by both declining sales and falling prices, and rumors of a potential sell-off crop up on a consistent basis.

Peugeot, or more specifically PSA Peugeot Citroen, is in a similar situation, plagued by high production costs and lagging sales. The company has recently announced new cost-cutting measures, and is spinning off its logistics business to raise money for a planned global expansion.

Reuters is reporting that GM has entered talks with Peugeot, aimed at devising a strategy for sharing vehicles and components. Unlike joint ventures between Volkswagen and Suzuki, or Ford and Mazda, the relationship between GM and Peugeot would not involve a blending of capital.

Industry analysts were unimpressed by the news, quickly pointing out that both Peugeot and Opel have an over-capacity problem in the European market.

Speaking specifically about Peugeot, Credit Suisse analyst Erich Hauser remarked, “We struggle to see how yet another ‘me-too’ cooperation with GM Europe on componentry will help address any of the fundamental issues.”

Peugeot is viewing the talks as necessary to its globalization strategy, and sees potential for cooperation beyond the European market. A partner could help Peugeot proceed with a planned factory in India, a project that was put on hold last month. It would also like to turn around losses in Latin America, where GM has a strong presence.

Peugeot said of the discussion, “there can be no certainty at this stage that these discussions will result in any agreement.” GM, per its corporate policy, was even less committal, admitting only, “we routinely talk to to others in the industry but have no comment beyond that.”

While it may be too early to congratulate the companies on their pending nuptials, it’s relatively clear that the relationship has progressed beyond the initial speed-dating phase.

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