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

TTAC Staff
by TTAC Staff

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.

TTAC Staff
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  • Shipwright Shipwright on Oct 24, 2013

    ”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],” Seriously? When did GM decide that PSA was struggling, before or after they invested in them? What a load of BS. GM knowingly got into bed with a very weak PSA much to the consternation and confusion of the best and brightest here and now they decide they want to back out. What a huge waste of limited capital.

    • Pch101 Pch101 on Oct 24, 2013

      Initially, GM appeared to be setting up PSA as a place to dump a failing Opel, as it planned to build its European sales with Korean-made Chevys. But Chevy has had disappointing sales in Europe, while South Korea is becoming less attractive by the day. So now the resources are moving back to Opel, while expectations for GM Korea are being downgraded. With the new gameplan to fix Opel, the PSA relationship loses its value.

  • Asdf Asdf on Oct 24, 2013

    Yet another automaker selling out to the Chinese. Did someone pay Victor Muller top bucks in order to come up with this immensely brilliant strategy? Or was it masterminded in-house by those responsible for nearly running PSA into the ground? Whatever happened to competent leadership, and valuing the importance of retaining strategic assets...

    • Lorenzo Lorenzo on Oct 24, 2013

      There was no one mastermind involved in running PSA into the ground. It was a combination of the Euro, incredibly anti-competitive government work rules, the emergence of eastern Europe as low cost competition, and European demographics. Renault partnered with Nissan which has a strong leadership, and embraced global sales in time. You might blame the Peugeot family for their reluctance to give up control, but PSA needed a strong partner and expansion into global markets long ago.

  • El scotto Oh, ye nattering nabobs of negativism! Think of countries like restaurants. Our neighbors to the north and south are almost as good and the service is fantastic. They're awfully close to being as good as the US. Oh the Europeans are interesting and quaint but you really only go there a few times a year. Gents, the US is simply the hottest restaurant in town. Have to stand in line to get in? Of course. Can you hand out bribes to get in quicker? Of course. Suppliers and employees? Only the best on a constant basis.Did I mention there is a dress code? We strictly enforce it. Don't like it? Suck it.
  • 1995 SC At least you can still get one. There isn't much for Ford folks to be happy about nowadays, but the existence of the Mustang and the fact that the lessons from back in the 90s when Ford tried to kill it and replace it with the then flavor of the day seem to have been learned (the only lessons they seem to remember) are a win not only for Ford folks but for car people in general. One day my Super Coupe will pop its headgaskets (I know it will...I read it on the Internet). I hope I will still be physically up to dropping the supercharged Terminator Cobra motor into it. in all seriousness, The Mustang is a.win for car guys.
  • Lorenzo Heh. The major powers, military or economic, set up these regulators for the smaller countries - the big guys do what they want, and always have. Are the Chinese that unaware?
  • Lorenzo The original 4-Runner, by its very name, promised something different in the future. What happened?
  • Lorenzo At my age, excitement is dangerous. one thing to note: the older models being displayed are more stylish than their current versions, and the old Subaru Forester looks more utilitarian than the current version. I thought the annual model change was dead.
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