Peugeot turns to Chinese partner as GM sells stake
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.
Frequently Asked Questions about this Article…
General Motors is selling its 7% stake in PSA Peugeot Citroen because the partnership did not yield the expected savings and benefits. The alliance was scaled back, and GM decided to sell its shares through a private placement to institutional investors.
General Motors invested €320 million (approximately $492 million) in PSA Peugeot Citroen as part of an alliance aimed at achieving savings through joint purchasing and product development.
The GM-Peugeot alliance did not deliver the anticipated savings, leading to a 40% reduction in expected savings. Additionally, Peugeot's 2013 profit was negatively impacted by €1.1 billion due to currency swings and the lack of savings from the alliance.
Goldman Sachs is managing the transaction for the sale of General Motors' shares in PSA Peugeot Citroen.
Recently, GM announced the sale of its 8.5% stake in Ally Financial for about $900 million and plans to pull its Chevrolet brand from Europe by the end of 2015. GM also plans to cease manufacturing in Australia by 2017.
Following the scaled-back alliance with GM, Peugeot is pursuing deeper cooperation with its Chinese partner, Dongfeng Motor Corp, to boost sales in growth markets. The Peugeot family has agreed to raise at least €3 billion, with Dongfeng and the French state each investing €1.5 billion.
Peugeot will produce a compact crossover vehicle for both car makers at its factory in Sochaux, France. Additionally, GM will assemble a small van for both companies in Zaragoza, Spain.
The GM-Peugeot partnership offered limited potential because both car makers largely compete for the same customers in Europe, which restricted the scope for achieving significant cost savings.
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