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GM Mulls Deeper Ties With PSA Peugeot Citroen, Could Form Joint Venture: Report

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GM CEO Dan Akerson (left) and PSA Peugeot Citroen CEO Philippe Varin

GM CEO Dan Akerson (left) and PSA Peugeot Citroen CEO Philippe Varin

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In March of this year General Motors made the surprise move of forming an alliance with PSA Peugeot Citroen by purchasing seven percent of the French automaker’s stock. The original deal was structured around two main pillars: the sharing of vehicle platforms, components and modules; and joint purchasing of commodities, components and other goods required to build cars.

Unfortunately, Europe’s worsening financial crisis has seen PSA’s outlook--and its stock price--drop since then, but despite this GM remains committed to its original deal and may see its alliance deepen.

Reuters, citing sources close to both firms, is reporting that GM and PSA are discussing closer integration of their respective European units. In particular, GM is looking at merging Opel and Peugeot’s manufacturing operations.

There are three main scenarios being discussed, the sources claim, including selling Opel to Peugeot, GM buying Peugeot’s automotive business, or merging Opel and Peugeot into a new joint venture. Of the three scenarios, the latter is looking most likely as GM could use such a structure to get its loss-making Opel unit off its own financial statements.

Another source has told Automotive News Europe (subscription required) that GM could take just a 30 percent in the joint venture, plus add $10 billion of cash in the new company, which would mean it would not have to consolidate Opel's financial results. Such a move would also enable more job cuts, said the source.

Another key benefit could be the sharing of platforms across models. As part of its original alliance deal announced in March, GM and PSA said they intend to focus on small and mid-size passenger cars, MPVs and crossovers. The automakers also said they’re consider developing a new common platform for low emission vehicles. The first vehicle on a common platform is expected to launch by 2016.

Neither GM nor PSA has commented on the latest reports, though in the past GM has stated that it has no plans to sell Opel.

Stay tuned for an update.
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