Published on July 2nd, 2013 | by Daniel Sherman Fernandez
General Motors To Take Over Ailing PSA
(Reuters) PSA/Peugeot-Citroen unions have voiced concern over a deeper tie-up plan with General Motors that sources say the French carmaker is seeking to revive. Such a move would require major capacity cuts and face serious obstacles, analysts also said. The discussions may signal that the companies are preparing to tackle overcapacity in their European operations. PSA and the Peugeot family have repeatedly declined to comment on a Reuters report that the founding family is ready to hand over control in return for a new cash injection from GM.
GM reiterated it had no current plans to invest more cash in PSA. The French carmaker also inconclusively explored a deal with Chinese partner Dongfeng Motor Group. Under the terms of their alliance, which saw GM take a 7 percent PSA stake in a 1 billion euro ($1.3 billion) share issue last year, the companies plan to pool future vehicle programs. But they have so far avoided tough decisions on combining production to generate far greater potential savings.
Because of their excess capacity – with PSA’s French factories running at 71 percent and Opel’s German plants at 66 percent of maximum output – the tie-up would require politically unpalatable closures and firings. Such questions would resurface immediately with any deeper combination of their European operations, analysts predicted.
A combination that reduced capacity to current demand levels would eliminate 8,000 to 10,000 jobs at PSA and almost 4,000 at Opel. PSA clearly needs outside cash because the family has other investment priorities.