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GM and PSA Peugeot Citroën enter long-term strategic alliance; considering new common platform for low-emission vehicles

29 February 2012

General Motors and PSA Peugeot Citroën are forming a long-term and broad-scale global strategic alliance intended to leverage the combined strengths and capabilities of the two companies; contribute to the profitability of both partners; and strongly improve their competitiveness in Europe.

The alliance is structured around two main pillars: the sharing of vehicle platforms, components and modules; and the creation of a global purchasing joint venture for the sourcing of commodities, components and other goods and services from suppliers with combined annual purchasing volumes of approximately $125 billion. Initially, GM and PSA Peugeot Citroën intend to focus on small and midsize passenger cars, MPVs and crossovers. The companies will also consider developing a new common platform for low-emission vehicles. The first vehicle on a common platform is expected to launch by 2016.

Each company will continue to market and sell its vehicles independently and on a competitive basis. Beyond these pillars, the alliance creates a flexible foundation that allows the companies to pursue other areas of cooperation.

In connection with the alliance, PSA Peugeot Citroën is expected to raise approximately €1 billion (US$1.34 billion) through 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, as a sign of its confidence in the success of the alliance. As part of the agreement, which includes no specific provision regarding the governance of PSA Peugeot Citroën, GM plans to acquire a 7% equity stake in PSA Peugeot Citroën, making it the second-largest shareholder behind the Peugeot Family Group.

The alliance synergies, in addition to our independent plans, position GM for long-term sustainable profitability in Europe.

—Dan Akerson, GM chairman and CEO

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.

—Philippe Varin, chairman of the managing board of PSA Peugeot Citroën

Under the terms of the agreement, GM and PSA Peugeot Citroën will share selected platforms, modules and components on a worldwide basis in order to achieve cost savings, gain efficiencies, leverage volumes and advanced technologies and reduce emissions. Sharing of platforms not only enables global applications, it also permits both companies to execute Europe-specific programs with scale and in a cost-effective manner.

This alliance enhances but does not replace either company’s ongoing independent efforts to return their European operations to sustainable profitability.

The purchasing cooperation defined in the agreement allows the companies to act as one global purchasing organization when it comes to sourcing commodities, components and services from suppliers, taking full advantage of the joint expertise, volume, platforms and standardized parts. Combining GM’s robust global processes and organizational structure with best practices from PSA Peugeot Citroën will bring significant value and efficiencies to the purchasing operations at both companies, the new partners said.

Additionally, the alliance is exploring areas for further cooperation, such as integrated logistics and transportation. To this end, GM intends to establish a strategic, commercial cooperation with Gefco, an integrated logistics services company and subsidiary of PSA Peugeot Citroën, whereby Gefco would provide logistics services to GM in Europe and Russia.

The total synergies expected from the alliance are estimated at approximately US$2 billion annually within about five years. The synergies will largely coincide with new vehicle programs, with limited benefit expected in the first two years.  It is expected the synergies will be shared about evenly between the two companies.

The alliance will be supervised by a global steering committee that includes an equal number of senior leader representatives from each company. Its implementation is subject to requisite regulatory approvals in certain jurisdictions as well as notification to the appropriate workers councils.

February 29, 2012 in Vehicle Manufacturers | Permalink | Comments (2) | TrackBack (0)

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Comments

I suppose it is about filling the gap left by Opel.

There is obvious synergy between the two companies and a lot of money to be saved by sharing platforms, engines etc.

Peugeot would have very good diesel engines which might be of interest to GM globally (but so would Opel).

The problem is overcapacity in Eureope and all the European makers all face the same issue. Sclerotic socialist governments, do not allow the closing of old, obsolescent facilities, except with massive cost.

Since neither automaker wants to face facts, like the Americans did a few yearsa ago, they hope to save enough in joint purchasing to overcome the massive losses due to retaining useless over capacity. In effect subsidising their losses, from the losses impssed on their suppliers; and possibly driving them into bankruptcy.

It sort of like the drunk looking for his dropped keys under the street lamp, even though he dropped them up the street, in the dark. He did so, merely because the light is better there.

I predict that this "solution" has as much potential for sucess, as the drunk's under the street light, search did.

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