PSA's GM Partnership Under Threat if Dongfeng Deal is Successful

The business situation for PSA PeugeotPeugeotFrance, 1882 > present120 models
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-CitroënCitroënFrance, 1919 > present94 models
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is looking increasingly dire. GMGMUnited States of America, 1998 > present8 models
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may scale back PSA cooperation just a year after buying 7% of the company if PSA's negotiations with Dongfeng to sell a third of the company are successful. 

GM and PSA are still developing five future platforms together and have created joint purchasing and logistics agreements.

"We started out with about 40 potential projects. There are things we would have liked to do but can't. It's very frustrating and takes a great deal of time,” said PSA program chief Jean-Christophe Quemard.

The Dongfeng deal would net PSA around €3 billion, and Dongfeng would get access to Peugeot and Citroën’s technology. PSA says that it would use the money to expand outside of Europe.

However, part of the agreement between GM and PSA allows GM to pull out of the alliance if a new investor takes more than 10% of PSA stock. GM Europe Chairman Steve Girsky has hinted that it would pull its partnership if the Dongfeng deal goes through.

An announcement from PSA about negotiations with Dongfeng is due next week when it discloses Q3 financial data. It is refusing to comment until that time.

It has set a goal of returning to profitability by 2015.

Problems with the GM/PSA deal started shortly after it bought stock in the company. GM had hoped to fold Opel into PSA to create a European joint venture, but PSA was forced to take a French government bailout, which squashed the plans.

Source: Automotive News Europe