PSA: Business Model for Joint Small Car With GM "Just Wasn't There"

The next Citroen C3 and Peugeot 208 will not share a platform with Opel’s Corsa as originally planned

In the wake of news that China’s Dongfeng Motors is going to take an equity stake in PSA/Peugeot Citroen, the French automaker says that it is scaling back its alliance with General Motors, which owns 7% of PSA. PSA said that a planned joint subcompact platform that was seen as the basis of the tie-up with GM will probably be cancelled. “Further analysis showed that the business model just wasn’t there,” a PSA spokesman said. Financial statements released by PSA say that anticipated savings of $1 billion due to synergies with GM will be adjusted downward.

The cancelled platform was supposed to have underpinned replacements for the Peugeot 208, Citroen C3 and Opel Corsa. Barclay’s analyst Kristina Church said that a common small car was “absolutely key” to the partnership.”It certainly seems GM has no focus on the alliance with Peugeot any more. They don’t want to be partnered with a struggling company, and they have alternative methods to turn things around [in Europe],” Church said.

Still, GM and PSA spokesmen said that the alliance is going forward. “We have other projects under review. Some projects are not economically feasible, which is why they are dropped, but we’re taking the projects one-by-one and examining their economic feasibility first,” a PSA rep said. The companies will still produce a jointly developed small minivan at GMs Zaragoza, Spain factory starting in 2016. “We are moving forward with the implementation” of the projects which have already been agreed upon, Ulrich Weber said for GM.

The deal with GM was originally a main part of PSA CEO Philippe Varin’s strategy to turnaround the struggling French carmaker. Working with a company of GM’s size was seen as a way of reducing costs. After GM took a 7 percent stake in PSA in February, 2012 the automakers announced plans for at least five joint vehicle and powertrain programs. However, soon afterwards, GM revealed that SAIC, it’s partner in China could veto some of the plans.

Remaining are the upcoming small minivan and another joint vehicle development program working on a crossover, along with joint purchasing. PSA did say that so far joint purchasing has saved the company about 60 million euros so far this year.