By on March 1, 2012

 

GM and PSA praised monstrous synergies and annual cost savings of $2 billion a year as an effect of the alliance that was announced yesterday. The savings won’t come immediately, rather in about 5 years from now. Moody’s thinks it’s a bad deal, and did cut PSA’s debt rating to junk status.

Moody’s Investors Service lowered Peugeot’s rating to Ba1, the highest so-called “speculative” grade with a negative outlook. Moody’s reasoning, according to Reuters:

The cost of implementing the alliance will hurt Peugeot’s earnings in the short term, the agency warned, and cooperation may not produce the savings expected later. “Moody’s notes that past mergers and alliances in the automotive industry have often not resulted in the anticipated competitive advantage and improved performance,” it said.

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13 Comments on “Moody’s: GM Deal Turns PSA Into Junk...”


  • avatar
    lilpoindexter

    Another merger of equals.

  • avatar
    GS650G

    Does this mean we the taxpayers have a stake somewhat in PSA?

  • avatar
    rpol35

    BFD (and I don’t mean Baltimore Fire Dept.), PSA was junk before GM came along, this just formalizes it.

  • avatar
    pgcooldad

    Some way, some how, down the line … there will be people here blaming the UAW for GM’s problems and not look back at management decisions like these “billion-dollars-mergers”.

  • avatar
    JCraig

    So GM used 1% of its cash to save money on the next generation of Opel (and Chevy and Buick)development costs. Seems like a good move for them.

  • avatar
    NN

    maybe this will allow GM to practically starve/shut down Opel and Vauxhall, reduce capacity, and still maintain access to competitive European-developed platforms and technologies (really Opel’s only valuable asset). Between GM Daewoo and Peugeot, GM could still outsource most mass market FWD platforms.

  • avatar

    why does an alignment with GM bring back memories of Michael “Kissing” Fredo?

  • avatar
    spt87a

    Boy, this reminds me of a very few years ago when GM allied itself with Fiat and ended up paying a 1 billon break up fee a couple years later. Maybe if they had saved that billon the feds could have saved a billon during the bailout (Uncle SAM really likes giving money to Fiat for some reason).

    They never learn – maybe spend the 1 billon on product development instead of wasting it on more organizational changes.

    And the comment about blaming the union is on the money – management at GM has long made decisions like these that probably fill the pockets of said management with short term performance bonuses or some kind of M&A fee kickback. At the minimum if the union is to blame then it was management that didn’t stand their ground at contract time and didn’t lead by example thus inciting the hourly workers to demand their share.

  • avatar
    indi500fan

    No institutional memory.

    Everybody who was there for The Rick & Jack Smith’s Fiat Fiasco has retired or quit.

    Let me guess….this Peugeot deal will cost GM $2 bil to unwind after 5 years.

  • avatar
    righteousball

    So THIS is why Peugeot couldn’t buy into Mitsubishi huh! :P

  • avatar

    Next SAAB. Start deathwatch.

  • avatar

    On the other hand. What is so special about GM that it always attracts all kind of junk?

    There is also the question to the older generation. Do you remember how synergies with FIAT ended up? FIAT got Chrysler for free. It may not work this time – there is no other US company for Peugeot take over as a gift from US government. Unless it is GM.


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