General Motors and PSA Peugeot Citroën have confirmed they are to enter into a long term strategic alliance to improve their competitiveness, particularly in Europe, achieving US$2bn in cost savings annually.
Initially, GM and PSA said they will 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.
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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.
The companies added that they will also pursue other others of cooperation.
GM chairman and CEO Dan Akerson said:“This partnership brings tremendous opportunity for our two companies. The alliance synergies, in addition to our independent plans, position GM for long-term sustainable profitability in Europe.”
PSA chairman Philippe Varin added: “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 mobilised to reap the full benefit of this agreement.”
The two automakers have a combined annual purchasing volume of approximately US$125bn and clearly expect to make significant savings in this area. Each will continue to market and sell its vehicles independently.
PSA Peugeot Citroën is expected to raise approximately EUR1bn (US$1.3bn) through a capital increase, with preferential subscription rights for PSA shareholders, underwritten by a syndicate of banks and including an investment from the Peugeot family group.
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 making it the second largest shareholder behind the Peugeot family group.
In a joint statement, the companies said: “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 will also allow both companies to develop Europe-specific programs with scale and in a cost effective manner.
Although both companies are struggling financially in Europe, they added the alliance does not replace their independent efforts to return their European operations to sustainable profitability.
The purchasing cooperation allows the companies to act as one global purchasing organisation when it comes to sourcing commodities, components and services, taking full advantage of volume, platforms and standardised parts.
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, the PSA subsidiary which will provide logistics services to GM in Europe and Russia.
The alliance will be supervised by a global steering committee that includes an equal number of senior management representatives from both companies.
Its implementation is subject to regulatory approvals and notification to the appropriate works councils.
ANALYSIS: GM/PSA partnership could bring mutual benefits
