PSA Peugeot Citroen, GM cut costs collaboratively

An announcement overnight that GM and PSA Peugeot Citroen will forge an alliance to lower costs reads like Fiat's strategy acquiring Chrysler.

But unlike the Fiat and Chrysler venture, the alliance between GM and PSA Peugeot Citroen —with GM taking a seven per cent share in the French corporation — will bear no impact on the "governance" of PSA. The new alliance aims to share the costs of developing new platforms, components and modules, to underpin global product ranges. Additionally, the two companies anticipate significant savings to be gained by purchasing from the same suppliers. According to a press release issued jointly, the combined purchasing power of GM and PSA is estimated to be US $125 billion a year.

GM's prospective pecuniary interest in PSA will make it the second largest shareholder in PSA, after the Peugeot family. This element of the strategic alliance is expected to boost confidence in the French company, which anticipates raising around €1 billion as a consequence. This will derive from "a capital increase with preferential subscription rights for shareholders of PSA Peugeot Citroën, underwritten by a syndicate of banks and including an investment from the Peugeot Family Group", according to the press release.

“This partnership brings tremendous opportunity for our two companies,” the press release quoted Dan Akerson, GM chairman and CEO. “The alliance synergies in addition to our independent plans, position GM for long-term sustainable profitability in Europe.”

“This alliance is a tremendously exciting moment for both groups and this partnership is rich in its development potential," said Philippe Varin, chairman of the managing board of PSA Peugeot Citroën. "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.”

The two companies will work together developing small and mid-sized passenger vehicles, people movers and SUVs, the press release reveals, with the first fruits of their joint labour due around 2016. And the companies will also assess the value of jointly developing a common platform for low-emissions vehicles.

The alliance will not change or diminish efforts by the two companies to turn around their profitability in Europe, it was explained in the press release, with GM understood to be highly focused on improving Opel's financial standing, which is why the German brand has been casting around for new markets — like Australia.

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