GM and Peugeot Joint Venture Halted After PSA Bailout

General MotorsGMUnited States of America, 1998 > present8 models
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and PSA PeugeotPeugeotFrance, 1882 > present120 models
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-CitroënCitroënFrance, 1919 > present94 models
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were slated to announce their joint venture that would merge OpelOpelGermany, 1863 > present85 models
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, VauxhallVauxhallUnited Kingdom, 1857 > present31 models
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, Peugeot and Citroën on October 31, but news has come out that those plans have fallen through because Peugeot accepted a French government loan that prevents it from firing workers or closing factories. 

According to Reuters, GM broke off the negotiations after Peugeot took the loan €7 billion because the joint venture would require both sides to fire workers and close factories. It is impossible politically for GM to make all of the cuts from Opel and Vauxhall to make the joint venture. As part of Peugeot's agreement of the loan was that a government member and labor union member now sits on the company's board of directors. 

The two companies will wait until the market picks up before they will reconsider merger or joint venture discussions. 

The concept for the joint venture was that GM would be able to get rid of its total ownership of Opel and Vauxhall and transfer them to PSA. GM would also invest about $5 billion in the new company. It would continue to own stock in the new company but have to worry about the new company's financial losses on its stock price.

This decision might hurt Peugeot in the long run. GM was offering them the chance to be a major competitor to Volkswagen at least in Europe. It would have had to fire some workers and close some plants, but it would have likely been in a stronger market position at the end. Instead, it took the bailout from the government that guarantees things for the short term, but it does nothing to make the company's cars better or decrease its capacity. 

Source: Automotive News