GM, PSA Update JV, Scale Back Expectations

General Motors and PSA Peugeot Citroen revamp their alliance in Europe, dropping certain programs and adding others while continuing to pursue purchasing and logistics savings, an update that scales back original expectations for their 10-month-old joint venture.

The automakers say in a statement today the JV also has been amended to eliminate any objections GM might have to an investment in struggling PSA by another automaker, a move that results in plans by GM to privately sell its 7% stake in PSA to an institutional investor. GM acquired the PSA stake for $400 million as part of the JV’s formation in March 2012.

PSA appears close to winning a long-awaited cash infusion from China’s Dongfeng, with sources telling Reuters negotiations on a deal look “favorable.” GM previously could have objected to the tie-up, arguing it would affect its strong position in the Chinese market.

The updated alliance between GM and PSA sees estimated cost saving dwindling to$1.2 billion by 2018 from a previously expected $2 billion.

The automakers plan to continue cooperation on two previously announced products based on PSA platforms, a B-segment multipurpose vehicle and a C-segment CUV. They now add a new line of B-segment products in the light commercial space coming off a new generation PSA platform.

The first vehicles from the alliance continue to be expected in 2016, and joint manufacturing will go ahead as planned with both automakers’ MPVs coming from GM’s Zaragoza, Spain, assembly plant. The CUVs will be built at PSA’s Sochaux, France, assembly plant. It is unclear where production of the LCVs will be assigned.

In addition to waiving GM’s right to end the alliance if Dongfeng invests in PSA, the updated JV further scales back expectations by eliminating a clause calling for its termination if a minimum number of cooperative programs are not executed within a specific but unreleased timeframe. The original JV reportedly called for at least five product and powertrain programs.

However, GM Europe President Karl-Thomas Neumann leaves the door open for additions to the JV down the road.

“The partners are now focused on execution of the alliance while remaining open to new opportunities,” he says in a statement.

GM and PSA created the alliance seeking savings they each would gain from combining certain purchasing and logistics operations in Europe and sharing platforms for vehicles specific to that market. The partners reportedly sought to expand the JV earlier this year, with GM potentially taking over PSA altogether but those plans were scrapped.

Updates to the JV come as GM gets more aggressive in efforts to turn around its own fortunes in Europe, where the automaker lost $1.8 billion in 2012 and $4.3 billion since emerging from its 2009 U.S. bankruptcy.

Earlier this month, GM pulled its Chevrolet brand from the region because the products overlapped with vehicles from Opel. The automaker also has moved its Russian unit from under GM International Operations to Opel, hoping rising sales in that country will speed Opel’s turnaround.

GM this week said it would stop producing vehicles in Australia by the end of 2017 and instead import products into the country. The decision could have a broader effect on GM’s Asia Pacific operations, with adjustments to its manufacturing footprint in South Korea expected.

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