PSA Scales Back Ford Diesel Engine Deal After GM Hookup

PARIS – One month after General Motors and PSA Peugeot Citroen unveiled plans for a 10-year alliance, the French auto maker announced it was loosening its ties with Ford on diesel-engine development.

PSA said last week that it would continue working with Ford on 1.4L and 1.6L passenger-car diesels, but that the auto makers would develop 2.0L, 2.2L and V-6 variants separately.

That decision was made while GM and PSA were negotiating terms of their alliance, including the sharing of vehicle platforms and components and establishing a global purchasing joint venture. Their partnership was announced Feb. 29.

The French newspaper Les Echos calls the scaled-back engine-development agreement between PSA and Ford a divorce. Le Monde calls it “the first victim” of the GM-PSA Alliance.

Ford denies the change has anything to do with GM. During discussions that started in 2011, spokesman Stephane Cesareo says, Ford and PSA could not agree upon a common set of requirements for the bigger 2.0L and 2.2L engines used in passenger vehicles and commercial vans.

Last year, the auto makers manufactured 2.8 million diesel engines, of which 75% were the 1.4L and 1.6L diesels that will remain in production. Ford tooled 1 million; PSA, 1.8 million. The car companies have jointly developed the next generation of these engines that will comply with Euro 6 emissions rules taking effect in 2014.

It is not clear what divided the two auto makers, but PSA may be oriented toward its big European van business, where high mileage is the biggest requirement, while Ford may be targeting emerging economies, where less-sophisticated, less-expensive engines are demanded.

Cesareo notes that Opel or Chevrolet could end up using the same small diesel in Europe that Ford uses, because the agreement between Ford and PSA allows each partner to sell diesels out of their share to other auto makers. While Ford is unlikely to do so, PSA could.

Ford sells some 1.6L diesels to Volvo, its former subsidiary, and Jaguar and Land Rover buy some 2.2L and 3.0L V-6 diesels.

PSA uses the 1.4L and 1.6L diesels in the Peugeot 208, 308, 3008, 5008 and Citroen C3, C4, C4 Picasso. The 2.0L and 2.2L engines are used in the Peugeot 508 and Citroen C5. PSA employs a few 3.0L V-6 diesels in the Citroen C5 and C6.

Ford deploys the small engines in the Ford Fiesta and Focus, and the 2.0L and 2.2L powerplants in the Ford Mondeo and Kuga.

The future of the Ford-PSA cooperation on small diesels is assured until about 2018, when new emissions rules are expected. The 2.0L and 2.2L engines will continue to be manufactured together while they are in use.

The partners hint that the agreement could end after the Euro 6 rules are implemented. They say the rupture in diesel development affects “as a first step” the engines used in commercial vehicles beginning in 2015, implying other steps could follow.

Cesareo says there is no plan to bring diesels to North America. A proposal considered in 2005 ultimately was rejected, and Ford’s gasoline-powered EcoBoost engines are addressing the need to reduce consumption in the U.S.

Separate development of the larger engines for the future may mean they will become more expensive, as there will be less volume and no partner to share development costs.

However, PSA could jointly develop the larger engines with GM. Cesareo says Ford’s plans to grow from annual sales of about 5.8 million units now to 8 million in 2015 means it may add enough volume on its own to amortize the cost of development and reach a profitable production volume.

While Ford passenger-car diesel sales are concentrated in Europe, it also sells diesel-powered utility vans such as the Transit and the Ford Ranger pickup being sold in the emerging markets of South America, Africa and Asia.

PSA and Ford started working together in 1998, when their respective CEOs were Jean-Martin Folz and Jac Nasser.