PARIS – The potential for a partnership betweenand Peugeot Citroen pleases investors, who have driven PSA’s share price up 14% on a day when average French shares lost a few points.
Following media reports of discussions between the two auto makers,confirms to French Labor Minister Xavier Bertrand that it is in talks to form a strategic partnership with someone. Bertrand says in a statement PSA CEO Philippe Varin tells him the discussions “are good news for the group.”
PSA says in a statement, “As part of its globalization strategy and performance improvement plan, PSA Peugeot Citroen is considering proposed cooperations and alliances. Discussions are ongoing and there is no certainty that they will lead anywhere.”
But media reports say people “close to the negotiations” indicate GM and PSA are discussing an alliance that goes deeper than the individual partnerships PSA has struck with, , , Mitsubishi and Fiat for particular products.
PSA’s automotive business lost E92 million ($122 million) in 2011, and the company is cutting costs, piling up debt and selling off some of its real estate and shares in subsidiaries in an effort to turn the situation around. GM’s European subsidiary, Germany-based Adam Opel, also is a money-loser and in the process of cutting costs in an attempt to survive.
A strategic relationship could result in shared platforms, research and development, common purchasing and other synergies, including capacity consolidation.
However, recent history is not promising. PSA failed to reach a strategic partnership with Japan’sin April 2010, although the two auto makers are partners on several vehicles, including the i-MiEV electric vehicle.
And GM’s partnership withended in a disaster for GM, although the divorce settlement helped the Italian auto maker not only to survive but also take over Detroit Three-player in the U.S.
While putting two money-losing European mass-market car companies together suggests many synergies for cost-cutting through plant closings, it doesn’t suggest opportunities to grow into new markets for either auto maker.
PSA’s Varin said earlier this year his company was open to a closer relationship with another auto maker, if such a deal meets three criteria: “That it is coherent with our strategy; that there are substantial, realizable synergies; and, finally, that the group remains independent.”
The Peugeot family holds 48.3% of PSA’s voting rights.
CEO Sergio Marchionne, who earlier this year said he might take a look at PSA, has indicated he is open to talks with competitors as a means to address the European industry’s overcapacity. But as of last month, he had not initiated such discussions.
“Somebody needs to be a first-mover in bringing about a consolidation,” he told journalists in Detroit. “All this capacity chasing volume is going to create fundamental destructive forces in the marketplace.”