Peugeot-GM Alliance Give Up Large Car Plan, Focus on Smaller Vehicles image

The GM-PSA Peugeot Citroen alliance has given up plans to build a large car, focusing only on three smaller vehicles.

GM and Peugeot announced they will work together to manufacture a new generation of small gasoline engines and also focus on “product and industrial initiatives in Latin America or other growth markets.” The news comes a few weeks after rumors spread that the alliance might end due to Peugeot’s worsening finances. The companies’ answer came shortly saying that the alliance is fully on track and that they have three areas to cooperate in: logistics, purchasing and product development.

GM and Peugeot previously said that they plan to jointly manufacture two small cars, a compact crossover and a larger vehicle, but that only the compact cars got the approval. By creating this alliance, which also includes a joint purchasing agreement, the two automakers plan to make annual savings of about $2 billion within five years.

The two companies also said they aim at building cars in Brazil, but these plans were postponed. If the companies are to manufacture small vehicles in Brazil, they will begin with two models for each automaker.

“So far the entire focus of the alliance has been Europe and I expect that to continue for some time,” said South America chief Jaime Ardila.