General Motors Europe Looking for Long-Term Relationship with Peugeot

By Jacob Brown | February 23, 2012
Henry Ford II famously quipped that the auto industry would eventually find itself consolidated down to a handful of major players—not the hundreds that existed worldwide in the 1950s when he uttered his sentiments. As it turns out, he's been more right than wrong so far. Further extending his wise observation, General Motors and Peugeot are reportedly in talks to create a wide-scale manufacturing alliance to curb their losses. As reported last week, GM's European Opel division bled through $747 million in losses last year; not as much as the year before, but still a big chunk of change. However, where it's adjusting with keeping its revenue up and cutting costs, it may not be able to become profitable without more help. Enter Peugeot, a French automaker that last sold a car in the U.S. in 1994. Peugeot has been desperately seeking partners like a girl rejected at the last minute by her prom date since the late 1990s. It's since formed a few alliances with BMW for Mini 1.6-liter engines, Ford for diesels in Europe, small cars in Europe with Toyota, and electric vehicles with Mitsubishi.
But now the ailing French giant wants a little more of a long-termer for a committed relationship. Peugeot and its subsidiary Citroen comprise the second-largest automaker in Europe behind Volkswagen. Together, they produced 3.5 million cars for the world last year, a 1.5-percent drop-off. That's still significantly less than Volkswagen's 5 million units alone—not even counting Audi or any of its other brands. "Peugeot is in a difficult situation because competitors like Volkswagen and Renault-Nissan can produce much higher volumes and so have a scale advantage," says Sascha Gommel, an analyst with Frankfurt-based Commerzbank, to Automotive News. The proposed alliance between GM and Peugeot would give both automakers resources such as engines, transmissions, and possibly whole cars. It would also likely involve sharing plants. GM's Opel unit is currently underutilizing much of its manufacturing, as it has moved to cheaper locations that can manufacture at smaller scales. GM and Peugeot will likely have an official announcement in early March at the Geneva Motor Show. If an agreement is made, look for stronger profitability from either of them in the future, as well as the French automaker possibly making its return to the U.S. eventually. Source: Automotive News (Subscription required)