General Motors and PSA Peugeot Citroen are the newest bedfellows in the motor industry after the two giants entered a alliance on Wednesday. The move is aimed at cutting costs for both and boosting their competitiveness in Europe.
It also means that GM will be taking a 7.0 percent stake in Peugeot, although their leaders stressed the limited aim of jointly saving on production costs rather than any more ambitious tie-up.
“This is an alliance, not a merger,” GM chairman Dan Akerson said in a conference call.
PSA managing board chairman Philip Varin assured that the French carmaker “remains independent, very clearly, on its strategic plan and its capital.”
BIG SAVINGS
Under the agreement, a joint global committee steering the alliance is expected to generate some $2 billion (R14.9 billion) in savings annually within about five years.
To do that GM, which controls money-losing European producers Opel and Vauxhall, and Peugeot will share certain vehicle platforms, components and modules.
But each will continue to “market and sell its vehicles independently and on a competitive basis,” they said in a joint statement.
GM and Peugeot will first work together on small and midsize passenger cars, family vans and crossover sport utility vehicles.
They expect to launch the first vehicle developed on a common platform - shared essential designs and architecture like the underbody and suspension - by 2016.
The partners also said they will consider developing a new common platform for low-emission vehicles.
“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,” they said.
The alliance will “contribute to the profitability of both partners and strongly improves their competitiveness in Europe.”
ENDING THE STRUGGLE?
Both car companies have struggled with flagging sales in Europe, where a eurozone debt crisis in recent years has led to recession.
For GM, nearly $750 million (R5.6 billion) in European losses marred a record year of profits in 2011, while Peugeot, which sells two-thirds of its vehicles in Europe, saw sales drop 1.5 percent last year and its profit halved.
Thus, Varin said the deal did not mean that the groups could ignore their production overcapacity.
“We have over-capacities in Europe that are clear for everybody but have to be dealt with by each partner,” he said in the conference call.
A source close to the matter told Dow Jones Newswires that GM was planning job cuts and possibly factory closings at Opel and Vauxhall, which together sell more than a million vehicles each year. -AFP & IOL