A European partnership between General Motors and PSA Peugeot-Citroen could assist both to achieve benefits from joint development and manufacturing alliances, Frost and Sullivan analysts said in a note.
Martyn Brigggs and Pietro Boggia, of the global consultancy’s automotive and transportation unit, noted that a rumoured alliance between the automakers had “resurfaced” in news reports and was likely to involve PSA and GM Europe’s Opel/Vauxhall brands jointly developing engines, transmission, and vehicles.
Go deeper with GlobalData
“With other major players like Renault and Nissan, and Fiat and Chrysler, forming strategic alliances, this may be the key advantage of Peugeot and GM working together, able to share investments and technology development,” the analysts wrote.
“This could lead to significant economies of scale for each partner, however, any detrimental social and political effects need to be considered carefully.”
Briggs and Broggia noted that Europe was challenging for many automotive manufacturers in 2011 as the difficult financial/economic climate, natural disasters in core component manufacturing countries Japan and Thailand, plus elimination of financial incentives, such as scrappage schemes, all contributed to a reduction in sales.
That was around a 1.5% reduction in Europe for Peugeot which reported a loss of EUR497m in the second half.
“What’s worse, the macro economic conditions in Europe are not forecast to recover until 2013 at least,” the analysts added.
Though GM posted record global results for 2011, with a net profit of $5.8bn, its European operations, essentially Opel/Vauxhall, booked a loss of EUR540m.
“Therefore, both companies are looking to restructure and be more cost effective in Europe and a potential partnership will assist the firms in realising respective benefits from component and manufacturing alliances,” Briggs and Broggia said.
“For example, GM has developed strengths in electric vehicles which could be advantageous in the long term, as well as having several vehicle platforms and capacity to leverage in the short term, whereas PSA has known strengths in diesel hybrid engines; this could be an example barter between the companies.
“Also, while Peugeot has a strong market share (over 13%) in Europe, its goal is to expand sales outside of Europe. In 2011, 38% of sales were from outside of Europe; the goal is to increase this to 50% by 2015, a strategy both in response to challenging European conditions and buoyant conditions elsewhere. GM may be able to offer Peugeot a cost effective route/market entry to emerging markets such as India and China.
“However, we believe such a partnership would be more likely to have an impact in the short term on European operations.”
The analysts noted that both automakers already have several strategic alliances.
“However, it may be the case that Peugeot in particular does not have a strong global strategic alliance that can bring effective cost reduction and manufacturing synergies,” they added.
