Reuters is reporting that the reason behind PSA/Peugeot Citroen’s financial tie-up with China’s Dongfeng Motors was the decision of General Motors, which owns 7% of the French automaker, to scale back cooperation with Peugeot. GM also apparently rejected a PSA/Opel merger backed by the French government.
In February of 2012, GM announced its investment in PSA as part of what was publicized as a broad based partnership. However, the relationship had problems only months later when GM announced that Shanghai Automotive (SAIC), its partner in China, vetoed some of the joint GM-PSA product planning.
Also, in June of this year, Peugeot had arranged approval from the French government for a restructuring that involved a merger with GM’s European Opel division, but the Detroit based automaker disapproved the deal. The less than smooth relationship with GM persuaded Peugeot CEO Philippe Varin to find other financial partners, ending in the reported $4 billion capital investment in PSA by Dongfeng and the French government. If that deal goes through, the holdings of GM would be diluted and the Peugeot family, which currently owns a bit more than a quarter of its shares, would no longer control the firm.
In exchange for the investment, Dongfeng will get access to PSA’s technology and markets.