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2012-03-01 07:56

INTERNATIONAL MARRIAGE: General Motors and PSA Peugeot-Citroen have agreed to a multi-billion dollar alliance for mutual cost-saving on parts and logistics.

NEW YORK – General Motors and PSA Peugeot Citroën have announced a long-term and broad-scale global strategic alliance to benefit from the combined strengths and capabilities of the two companies.

The union will also, they say, contribute to the profitability of each and strongly improve their competitiveness in Europe.

There are two main pillars: shared vehicle platforms and parts and the creation of a global purchasing unit “for commodities, components and other goods and services from suppliers”.

SET-UP COSTS

Plenty of purchasing power there: the two companies spend about $125-billion a year. Each company will continue to market and sell its vehicles independently and competitively.

To finance the marriage, PSA Peugeot Citroën needs about €1-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 their confidence.

As part of the agreement, which includes no specific provision regarding the governance of PSA Peugeot Citroën, GM plans to acquire a seven-percent equity stake in PSA Peugeot Citroën, making it the second largest shareholder behind the Peugeot Family Group.

'RICH POTENTIAL'

Dan Akerson, GM chairman and CEO, said: “This partnership brings tremendous opportunity for our companies and positions GM for long-term sustainable profitability in Europe.”

Philippe Varin, chairman of the managing board of PSA Peugeot Citroën, said: “This partnership is rich in development potential. The whole group is mobilised to reap the full benefit of this agreement.”

The initial focus will be on small and midsize cars, MPVs and crossovers with immediate consideration of a common platform for clean-exhaust vehicles to launch by 2016.

“This alliance,” the media release emphasised, “enhances but does not replace either company’s independent efforts to return their European operations to sustainable profitability.”

GLOBAL COMMITTEE

The companies will also investigate joint logistics and transport. GM intends to establish co-operation with Gefco, a logistics company and subsidiary of PSA Peugeot Citroën, to service GM in Europe and Russia.

Cost savings are expected to reach $2-billion a year within five years though with limited benefit for the first two years and the alliance will be supervised by a global steering committee made up of an equal number of senior representatives from both companies.

Implementation is subject to regulatory approvals in some jurisdictions as well as notification to the appropriate workers’ councils.

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