General Motors wants to become the second-largest shareholder in PSA Peugeot Citroen, and the gears of a deal for seven percent of the French automaker are beginning to mesh. It cost General Motors $423 million to buy into PSA, and the companies will remain competitors despite lashing their rafts together.

Both automakers would like to net cost savings over the course of the initial 10-year term of the partnership by leveraging their collective purchasing power for better prices from suppliers and also sharing economies of scale. GM and PSA are also looking to create vehicles, powertrains and/or components together within the next four years. The two companies have already started work on developing a low-cost small car to sell in emerging markets, and GM is looking to hook up with Peugeot's Gefco logistics arm, as well.

Peugeot stock has been forced down in value by the company issuing new shares for General Motors to buy, facilitating the deal. Peugeot has also suspended paying a dividend this year to keep cash on hand, further upsetting shareholders and the market in general. Market watchers suspect that any cost savings may be slow in coming, and there's little detail of how GM and PSA intend to address both companies' overcapacity problem in Europe or how they intend to find compromises with the typically strong labor unions there, as well.

Still, the hopeful need only look to Renault-Nissan for an example of the potential upside. Of course, GM's deal with Fiat, which started in 2000 and ended with a $2 Billion payment in 2005, is a reminder of just one of the ways the bloom could fall off this rose.


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  • 23 Comments
      • 3 Years Ago
      [blocked]
      Avinash Machado
      • 3 Years Ago
      So much anti-GM sentiment here.
      redgpgtp97
      • 3 Years Ago
      Hell they made 7.5 billion in profits last year alone. What's a few hundred million for investment sake and a few hundred million for profit sharing with UAW? They still have over 6 billion left .
      CBJMNWLD
      • 3 Years Ago
      I love GM stories just to watch Tea Bagger idiots come out of the woodwork. I could say more but many of these clowns do not have the ability to process relevant info... GMs investment in PSA is probably less than what they spend on NASCAR or motorsports combined annually
      2 Wheeled Menace
      • 3 Years Ago
      Hey.... have they paid our govt. back yet?
      Walt
      • 3 Years Ago
      This sewer called autoblog once again spews forth domestic vehicle hate while lavishing praise on all things imported. Isn't there someone on your staff that is ready to say "enough" and stand up to the anti-capitalist forces in your organization? Because when you've hacked the domestics into the ground, the capital that built them will be gone as will our capitalist society. Without capital, there is no America. Is that what you want? Please, for everyone's sake, take the huffpost blinders off before it's to late.
        johnb
        • 3 Years Ago
        @Walt
        I can imagine there aren't many gullible capitalists left to keep huffpost afloat much longer. Remember Air America? LOL
      zackwatt
      • 3 Years Ago
      Hmmmmmm, I wonder where they got $423 million......
        Basil Exposition
        • 3 Years Ago
        @zackwatt
        You must have missed this... http://abcnews.go.com/blogs/business/2012/02/gm-posts-record-7-6-billion-profit/
      johnb
      • 3 Years Ago
      Nice to see GM with so much money to throw around. $7,000 Bonuses, now this. Wonder where they're getting it?
      RustyShackelford
      • 3 Years Ago
      They are a true 'Merican company, GM. As soon as they get a little green in their pocket, they skip out on their debtors and head straight to the mall for a shoppin' spree. Typical.
        Josh
        • 3 Years Ago
        @RustyShackelford
        Typical what? 'Old' GM went to the mall to shop for companies like trinkets. 'New' GM NEEDS an int'l partner NOW to compete in today's market. They missed the boat on entering the Renault/Nissan alliance FOR FREE. They are the masters of buying door handles at the lowest price possibly by maxing its globalized might. Now they have to PAY $400 mill just get into PSA - equally as legacied and entrenched in their market. We always say it - but maybe this time* we'll get more small car expertise. Look - they even stopped the launch of the ZL1 for a factory defect. My mustang-loving side says 'ha-ha' but my rational side says something is different @ the General.
        RustyShackelford
        • 3 Years Ago
        @RustyShackelford
        Woops. That should be debts. In true American style, GM *is* the debtor.
        Joshua Bolden
        • 3 Years Ago
        @RustyShackelford
        +1
      Bob
      • 3 Years Ago
      So is this going to be like when GM was tied up with FIAT years ago and then had to pay them a billion dollars if the partnership went south? Sounds like Peugeot has everything to gain from this.
      NAIF S
      • 3 Years Ago
      There is an old adage about History repeating itself. Is GM trying to prove it. Think about all the past partnerships GM has gotten into and then think of the results. Here they go again.
      MyerShift
      • 3 Years Ago
      On a side note, I believe they should make Opel profitable first unless things have turned around.
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