Peugeot, GM Considering Closer Alliance of European Operations

Faced with a continent-wide debt and currency crisis, weak demand and little hope for a quick turnaround, European automakers are looking at a variety of strategies to reverse their fortunes, including investment in markets and manufacturing outside of Europe, and an export-focused strategy. But plant overcapacity and weak demand at home are persistent issues that won't disappear.

But according to a report from Reuters, the two automakers, which entered into an alliance earlier this year, are looking at a closer collaboration, including the possibilities of creating a 50-50 joint venture, selling Opel to Peugeot, or GM buying Peugeot's automotive business.

Neither company had any official comment on negotiations. The two carmakers expressed their intention of saving $2 billion collectively through the alliance, but the reality of having to close some plants is starting to look inevitable. Peugeot has to deal with the French labor unions, as well as a government that is a strong supporter of French domestic manufacturing. A tie-up between the two carmakers would also involve IG Metall, the German union representing most Opel workers.

Analysts have expressed skepticism about a tie-up between the two weak automakers, and the proposed union of Peugeot and Opel has reportedly caused contention within the Peugeot family, which retains 38 percent of voting rights.

Source: Reuters

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