Moody's: GM Deal Turns PSA Into Junk

Bertel Schmitt
by Bertel Schmitt

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.


Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Indi500fan Indi500fan on Mar 01, 2012

    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.

  • Righteousball Righteousball on Mar 02, 2012

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

  • Inside Looking Out Inside Looking Out on Mar 04, 2012

    Next SAAB. Start deathwatch.

  • Inside Looking Out Inside Looking Out on Mar 04, 2012

    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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