GM mulls merging Opel with PSA's auto division, sources say
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General Motors Co. and PSA/Peugeot-Citroen are exploring ways to combine their European operations in a second phase of the alliance they forged earlier this year, sources said.
One option is for GM's Opel/Vauxhall unit to merge with PSA's automotive operations in a joint venture, Reuters and the French newspaper La Tribune reported, citing sources who asked not be identified because the discussions are confidential.
GM would have a 30 percent stake in the joint venture and would inject up to $10 billion into the new company, a source familiar with GM's thinking told Automotive News Europe.
By taking a 30 percent stake, GM would not have to consolidate Opel's financial results, thus removing the U.S. automaker's biggest financial liability, the source said.
GM would inject cash in the venture because of the mismatch in annual revenues between PSA's 25 billion euros in European sales and Opel's 17 billion euros.
Discussions between GM and PSA on a deeper tie-up to save costs are still at an early stage, sources said.
A joint venture or other tie-up plan would likely encounter objections from the French government, which has been vocal in its defense of "national champion" industrial companies and their domestic jobs.
La Tribune said the discussions had also divided the Peugeot family, which controls the French automaker through a stake of about 25 percent, commanding approximately 38 percent of its voting rights.
GM and PSA are looking at ways to stem their losses in Europe's slumping auto market.
GM and PSA both declined to comment on the report. "We haven't commented on previous reports and we're not going to on this one," PSA spokesman Jonathan Goodman told Reuters.
GM spokesman Selim Bingol said in an e-mailed statement: "We don't comment on speculation. We are focused on earning the benefits from our alliance with PSA that we have identified."
Morgan Stanley analyst Adam Jonas said last month that GM needed to sell Opel because of dwindling sales and deteriorating pricing. GM has lost about $16 billion in Europe over the past dozen years. Jonas forecasts another $1 billion in annual operating losses for Opel, on average, through 2021.
PSA has said it is burning through 200 million euros in cash a month and does not expect to be in the black until 2014.
GM and PSA unveiled their initial agreement in late February with the goal of saving at least $2 billion annually within five years, evenly split between the partners.
GM paid 320 million euros for a 7 percent stake in PSA as part of the original alliance deal, though the value of that stake has plunged with the French automaker's shares. GM said in August it may have to write down the value of its investment.
PSA and GM outlined five possible joint vehicle programs following talks with French unions in March: a family of small cars for emerging markets; larger sedans; a fuel-efficient subcompact design; compact crossovers or SUVs; and a dual-clutch transmission.
Reuters contributed to this report
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