GM may tie up with Peugeot-Citroen

The report emerging form France suggests that the Vauxhall-Opel would be merging into a new joint venture company with Peugeot-Citroen. GM will own about 30 percent stake in the joint venture and will be injecting about 6.2 billion pound (about Rs.52402.4 crore) for the future development.

Conferring to the Automotive News Europe, this plan is one of the tentative plans that are being considered by the managements of GM and PSA, which also includes GM buying PSA’s automotive division or Opel outright being sold to PSA.

Currently the GM Europe and PSA partnership is mainly centered on the range of models that are being planned for the future which include replacements for the C5/408 and Insignia, a contender for Renault Dacia line-up, a supermini and new range of SUVs.

GM may tie up with Peugeot-Citroen

Although there are still some speculations that French Government might restrict the idea of PSA-GME JV, a 70 percent state to French and the fact that deal may prove to be vital for saving PSA from collapsing may prove to be clincher in the end.

Both the companies are losing huge sums of money due to the downturn in the Peugeot-Citroen European market, a situation that is marked by the underutilization of the factories and resources. GM is expected to lose about 1 billion pound (about Rs.8452 crore) in 2012 a loss that will affect the global condition of GM. PSA is also said to be losing around 161 million pounds (about Rs.1360.7 crore) each month.

By merging the four large brands together they are trying to enhance their production capacity. This will allow them to build more cars utilizing each platforms, this will save quite significant amount of money on development costs and will allow them to run their factories at over 85 percent efficiency.

The major downside of the merging is that at least one of the factories of the PSA-GM alliance will have to be closed, Peugeot-Citroen which is quite a big worry for UK’s Ellesmere port facility which recently got contract to produce 2015 Astra. Also merging of current models may require more than five years, which based on current market condition might not be available for the companies.

Allocating the engineering works between France and Germany could be controversial, but it is possible that the GM’s Russelsheim Engineering HQ may be retained by the GM because to carries work on global level.

At current stage the merging procedure is still in the outline stage but if it does not clears the potential hurdles and concerns, it is quite unlikely that it would be getting a green light to go.

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