Opel/Vauxhall and Peugeot-Citroën Negotiating Joint Venture

Reuters and French newspaper La Tribune are reporting that General MotorsGMUnited States of America, 1998 > present8 models
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is negotiating with PSA PeugeotPeugeotFrance, 1882 > present120 models
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CitroënCitroënFrance, 1919 > present94 models
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to create a joint venture between its European units OpelOpelGermany, 1863 > present85 models
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and VauxhallVauxhallUnited Kingdom, 1857 > present31 models
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and the French automaker. This is meant to be the second phase of GM's cooperation with PSA since acquiring 8% of the company in February.

The plan is for the automakers to create a new joint venture where GM would 30% and pay around $10 billion to get things started. By owning 30%, GM would be a stakeholder but not owner of the new company and would not have to report the new company's financial information on its books. 

The hope is that giving the French a 70% stake in the new venture will make the deal more attractive to the French government, which owns a portion of PSA stock. 

According to insiders, attempts to deepen the tie-up between GM and PSA have been in the works since right after GM purchased part of PSA. This joint venture plan is just the latest scenario to be negotiated. The two groups have also looked into selling Opel to PSA and selling PSA to GM. 

"There's too much capacity, not just assembly plants but also white-collar workers. This would be a way to take two companies and turn it into one and get rid of a lot of those resources," said a person close to the negotiations.

If the merger works, it would allow for platform and engine sharing among all four automakers, which would lower costs. Unfortunately, if there is too much capacity now, then combining the four companies will mean even more over capacity. Factories from one side or the other will have to close. 

Source: Automotive News Europe and Autocar