Peugeot turns to Chinese partner as GM sells stake

General Motors, the US car maker that acquired a stake in PSA Peugeot Citroen last year, is selling the entire 7 per cent holding as the French company seeks further help from its Chinese partner.

General Motors, the US car maker that acquired a stake in PSA Peugeot Citroen last year, is selling the entire 7 per cent holding as the French company seeks further help from its Chinese partner.

GM's €320 million ($492 million) investment in the Paris manufacturer was part of an alliance aimed at finding savings through joint purchasing and product development to improve the results for both firms in Europe. The alliance has been scaled back and Peugeot said this week savings would be 40per cent less than originally announced.

"The sale clearly says that the partnership did not work out", said Morningstar analyst David Whiston.

He added that no one on Wall Street "thought this was all that great of an idea in the first place".

GM will sell its 24.8 million shares in Peugeot through a private placement to institutional investors.

Goldman Sachs is managing the transaction.

Peugeot shares fell more than 7 per cent in Paris after saying 2013 profit will take a €1.1 billion hit from currency swings and from the lack of savings from the GM alliance.

For Peugeot, the scaled-back alliance and persistent losses have propelled it to pursue a deeper co-operation with Chinese partner Dongfeng Motor Corp to boost sales in growth markets.

The controlling Peugeot family, which has been at odds over how to progress, this week agreed to raise at least €3 billion. Dongfeng and the French state would each invest €1.5 billion.

GM chief executive Dan Akerson, who announced this week that he plans to retire next month, has made several strategic moves before departing after three years in the top job. GM has also announced the sale of its 8.5 per cent stake in Ally Financial for about $US 900million.

The car maker last week announced plans to pull its Chevrolet brand from Europe by the end of 2015 as it focuses on making its Opel and Vauxhall brands profitable. GM has lost more than $US 18billion in Europe since 1999 and Mr Akerson has targeted breaking even there by mid-decade. GM will also pull out of manufacturing in Australia by 2017.

The GM-Peugeot partnership, focused on cutting costs in Europe, offered limited potential because the two car makers largely compete for the same customers.

Peugeot will make a compact crossover vehicle for both car makers at its factory in Sochaux, France. The manufacturers earlier agreed that GM will assemble a small van for both companies in Zaragoza, Spain.

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