BERTRAND GAY

Why GM increasing its Peugeot shareholding is nonsense

Bertrand Gay is a France-based correspondent for Automotive News Europe.Bertrand Gay is a France-based correspondent for Automotive News Europe.
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The idea that General Motors would be interested in buying more Peugeot shares, as rumored earlier this summer, defies common sense.

Why would GM choose this option instead of investing in its Chinese and Asian operations? Investing there would offer GM better long-term benefits, especially since it would help boost brand awareness for Chevrolet, Buick and Cadillac in a hungry car-buying part of the world.

Buying additional Peugeot shares would be a financial maneuver, nothing more. Yes, the company's stock price of about 10.70 euros makes it attractive, but no one can predict how high it will go. GM should focus on being a carmaker not a stock trader.

The rumor is based on the assumption that the Peugeot family, which retains 25.3 percent of shareholding and 38.1 percent of the voting rights, is willing to dilute its share. That's not true, according to my sources.

Why? Because PSA/Peugeot-Citroen is on track to reach break even by the first quarter of 2015. Also, the two sides have been disappointed by the alliance because the relationship started with false expectations.

GM thought PSA was in a much better financial shape and would be able to absorb Opel. PSA, meanwhile, thought GM would help it build a stronger presence in key international markets.

Both assumptions were incorrect, so the alliance is really nothing more than a plan to have common purchasing as well as a few joint car projects.

An even more laughable rumor involving PSA is that that the Peugeot family would be willing to sell off the rest of its shares to China's Dongfeng Motor.

If that were to happen the Peugeots would be the first of the historic auto families, which include the Porsche-Piech, Ford, Agnelli, Quandt and Toyoda clans, to surrender to the Chinese.

Nobody would ever speak to the Peugeots again!

You can reach Bertrand Gay at autostratinternational@orange.fr.

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