Concern over Peugeot-GM tie-up

PSA Peugeot Citroen unions have voiced concern over a deeper tie-up plan with General Motors that sources say the French carmaker is seeking to revive. Such a move would require major capacity cuts and face serious obstacles, analysts also said – but the talks may signal that the companies are preparing to tackle overcapacity.

The Paris-based carmaker and founding Peugeot family have repeatedly declined to comment on a Reuters report that the founding shareholder is ready to hand over control in return for a new cash injection from GM. “A dilution of the family would not be good news,” a spokesman for Peugeot’s moderate CFTC union said.

“One of the last remaining family groups would cease to exist in its current form,” he said. “It’s the family attachment to the company that has preserved its French roots so far.”

GM reiterated it had no current plans to invest more cash in Peugeot. The French carmaker also inconclusively explored a deal with Chinese partner Dongfeng Motor Group, sources have said.

“There’s absolutely no question of selling the Peugeot family’s stake,” a source close to the Peugeots was quoted as saying – without addressing a possible capital increase or dilution of their existing shares.

Under the terms of their alliance, which saw GM take a 7 per cent Peugeot stake in a 1 billion euro ($1.3 billion) share issue last year, the companies already plan to pool future vehicle programmes. But they have so far avoided tough decisions on combining production to generate potential savings.

Opel, GM’s German subsidiary, vigorously denied media reports this week that its next Zafira minivan would be a rebadged version of the Citroen C4 Picasso.

Because of their excess capacity - with Peugeot’s French factories running at 71 percent and Opel’s German plants at 66 percent of maximum output - the tie-up would require politically unpalatable closures and firings. – (Reuters)