It’s final! A global alliance between General Motors and PSA Peugeot-Citroen has been established. With both automakers struggling in the ailing European market, the foremost goal of the tie-up is to help resuscitate and fortify their respective positions in the region.
GM’s Opel division has been bleeding money for more than a decade, becoming a sore spot for the American automaker. Nevertheless, it remains an important element in GM’s global product development strategy and initiatives, providing the company with many of its more notable vehicle platforms and powertrains. Having PSA Peugeot-Citroen (PSA) in the picture will likely bolster the number of platforms available to the company, potentially resulting in a more diverse product lineup. GM will also gain access to PSA’s Gefco logistics division, which will help it better serve its sales and parts network in Europe and Russia.
As for PSA, Europe’s second largest manufacturer hasn’t had the rosiest of times in its home market. The company has long struggled against key continental players, such as Volkswagen and Renault, often teetering on the brink of a financial loss. Notably much smaller than the behemoth that is GM, the French automotive group is likely the one in most need of economies of scale, which will be enhanced by a combined effort by both parties to purchase materials and share technologies. PSA, which is heavily dependent on the European market, will also gain access to markets where the more globally-oriented GM has a strong presence, such as China.
Indeed, the terms of the alliance stipulate that the two manufacturers will share selected platforms, modules and components on a worldwide basis in order to achieve cost savings, gain efficiencies, leverage volumes and advanced technologies and reduce emissions. Not only will such a strategy support their global operations, it also permits both companies to execute Europe-specific programs aimed at reviving their ailing operations in the region. The first products from the alliance will arrive in 2016.
The fruits of the joint-initiative will not be reaped immediately, however, as neither party expects significant cost-savings until the fifth year. If everything goes according to plan, equally-shared synergies will result in approximately US$2 billion in savings annually.
