The competitive environment.... Its an ALLIANCE? JR .. news..

Peugeot and GM strengthen alliance

By John Reed in London

PSA Peugeot Citroën  and General Motors  announced plans to join forces on four vehicle projects and to start purchasing parts together, primarily in Europe, the biggest steps yet in their eight-month-old carmaking alliance.

The news came on Wednesday as Peugeot confirmed details of a €7bn French state bailout to bolster its Banque PSA Finance in-house bank ahead of an expected credit rating downgrade. The French group also reported a 10 per cent drop in revenues at its core carmaking unit in the year to September.

The French and US carmakers, which are pooling efforts to cut their losses in a shrinking European car market, upheld their target of $2bn in annual synergies from the alliance, which they have in the past said they would achieve by 2016.

The four vehicle projects cover vans and small and midsized cars, and the two companies said the collaboration would combine “the best platform architectures and technologies from the alliance partners”.

They did not say at which plants they planned to make any of the joint vehicles – likely to be a contentious point with their unions in Europe at a time when both carmakers are closing plants.

Reacting to the news, the European Employees’ Forum at Opel, GM’s operation in Germany, demanded a meeting with management to glean information about the consequences of the alliance for employees.

“The EEF will not accept that employees will be played off against each other, neither inside the two companies nor between them,” the group said. “A race to the bottom concerning incomes and working conditions will not help any side of the alliance.”

Shares in Peugeot fell 4.3 per cent to €5.58.

The news came as rival carmaker Ford Motor , which is also losing money in Europe, said it planned to close a plant employing about 4,500 people in Genk, Belgium in 2014.

Peugeot and GM said they would make a compact-class multipurpose van for GM’s European Opel/Vauxhall brands and a compact small sport utility or “crossover” vehicle for Peugeot.

A second project will see the two carmakers collaborate to build a small multipurpose vehicle for Opel and Peugeot’s sister Citroën brand.

The two groups will also collaborate on a next generation of low-CO2 small cars for Opel/Vauxhall and Peugeot and Citroën in Europe and unspecified “other regions”.

A fourth project will see a joint programme under which the two groups will develop midsized cars together.

Peugeot and GM agreed to team up on February 29 in a global alliance that saw the US carmaker take a 7 per cent stake in its French partner, and the two companies agreed to pool logistics, purchasing and some vehicle programmes.

Despite some reports that the talks were moving slowly , the joint vehicle project was unveiled before an October 31 deadline set in the two carmakers’ master agreement. GM and Peugeot have already agreed a deal that will see the French group’s Gefco logistics division begin handling logistics for Opel too.

The two carmakers said they had “confirmed the next steps” in their joint purchasing organisation, which they said would be subject to approval by antitrust authorities.

Peugeot on Wednesday reported a 4 per cent drop in its group-wide revenues – including financing, logistics and parts – to €12.93bn in the third quarter. In the first nine months of 2012, it said overall revenues were down 5 per cent at €42.48bn.

Revenues in its automotive division were €28.73bn in the year to September, down 10 per cent on a year ago, and €8.52bn for the third quarter, down 9 per cent on a year ago.

The French group, which is heavily exposed to the French, Italian and Spanish car markets now in a state of collapse, said it expected Europe’s car market to contract by 9 per cent this year.

“The competitive environment is getting tougher, with increased pricing pressure and ongoing deterioration in the markets of southern Europe,” Peugeot said.