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General Motors in alliance talks with French automaker Peugeot

Shares in Peugeot Citroen, Europe’s second-largest carmaker, soared 15 percent after the company revealed it is in talks about a possible partnership with US auto giant General Motors

Peugeot gm 2012 02 22Enlarge
General Motors reported record profits for 2011 last week, but massive losses of $700 million in Europe dragged its fourth-quarter earnings down. Peugeot had announced plans to sell $2 billion in assets to reduce debts of $4.5 billion the day before. (LIONEL BONAVENTURE/AFP/Getty Images)

Shares in Peugeot Citroen, Europe’s second-biggest carmaker, have jumped 15 percent after the company revealed it is in talks about a possible alliance with US auto giant General Motors (GM).

French Labor Minister Xavier Bertrand told Europe 1 radio on Wednesday that Peugeot Chief Executive Philippe Varin “informed me last night of these discussions for a strategic partnership, and told me it was good news for the company.”

Peugeot shares soared in Paris morning trading following the announcement, The New York Times reported.

GM has been struggling to reverse its European operations’ dwindling fortunes for years, while both Peugeot and Adam Opel, which makes up most of GM’s European business, are under pressure to restructure in a market that has shrunk every year since 2008.

More from GlobalPost: General Motors reports record profits for 2011

Last Thursday GM reported record profits for 2011, but massive losses of $700 million in Europe dragged its fourth-quarter earnings down, and the firm is planning further costs cuts.

Paris-based Peugeot announced plans to sell $2 billion in assets to reduce debts of $4.5 billion the day before, Bloomberg reported. Its sales in Europe plunged 8.8 percent in 2011, to 1.68 million vehicles.

In a brief statement released Wednesday, Peugeot said: “In the context of its globalization strategy and improving operational performance, PSA Peugeot Citroen looks at potential cooperations and alliances.”

“Discussions are taking place and there can be no certainty at this stage that these discussions will result in any agreement.”

The Financial Times reported that the companies had been discussing developing vehicles together that would be sold under their respective brands, although analysts are sceptical about the potential benefits of this type of arrangement:

“We struggle to see how yet another ‘me-too’ cooperation with GM Europe on componentry will help address any of the fundamental issues,” said Erich Hause, an analyst at Credit Suisse quoted by the BBC.

Any deal would require the approval of the Peugeot family, which holds 30 percent of the firm’s shares and just 48.3 percent of voting rights among shareholders. 

More from GlobalPost: Details of United Auto Workers union contract with General Motors emerge

http://www.globalpost.com/dispatch/news/business-tech/120222/general-motors-alliance-talks-french-automaker-peugeot