Confirmed: General Motors, PSA Peugeot Citroën Form Alliance, GM Buys Small Stake in PSA

General Motors and PSA Peugeot Citroën have confirmed that they will enter a manufacturing alliance. The French automaker had already confirmed it was in talks to establish a strategic partnership, and reports had hinted that GM was the likely candidate.

The long-term alliance has two basic goals. First, General Motors and PSA will share vehicle platforms and components, potentially cutting development costs and helping the companies become more competitive in Europe. Second, the alliance will form a purchasing joint venture, allowing the two companies to source parts with a combined annual buying power of $125 billion — which could cut costs for commodities, parts, and services.

GM will acquire a seven-percent stake in PSA Peugeot Citroën, making it the second-largest shareholder after France’s Peugeot Family Group. PSA also hopes to receive an investment from the Peugeot Family Group and to launch a capital increase, to help raise €1 billion (about $1.33 billion).

At first, GM and PSA will work together on developing small and midsize cars, people-movers, crossovers, and a new platform for low-emissions vehicles (possibly electric cars). The first product to be built on a shared platform will launch in 2016.GM and PSA expect the partnership to save at least €2 billion (about $2.6 billion) by 2017, although savings from synergies will be “limited” for the first five years of the alliance.

On a conference call today, General Motors CEO Dan Akerson called the plan a, “Broad-scale, global strategic alliance that will improve each company’s competitiveness, and contribute to the long-term sustainability in Europe and around the world.”

“This alliance will strengthen and give real momentum to our strategy of taking our brands up-market and becoming more global,” said Phillippe Varin, chairman of PSA’s board of directors.

The agreement doesn’t preclude either company from exploring other areas of cooperation. And even with the alliance in place, both General Motors and PSA will continue to sell and market their vehicles individually. Moreover, both companies emphasize that this is an alliance rather than a merger, and that each will continue their own strategies for improving profitability in Europe.

“It is down to each company to determine their performance in Europe,” Varin said. “Obviously beyond these two pillars [platform sharing and purchasing] there will be potential for further cooperation.”

Source: GM

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