Peugeot may sell 7% to GM image

PSA Peugeot Citroen (UG), the second largest carmaker based in Europe may announce as soon as this week plans to sell a stake of about 7 percent to the U.S. based General Motors Bloomberg reports.

Last week the two automakers said they are in talks about forming an alliance to develop engines and build vehicles together in Europe. A deal between the two automakers could link the 11 factories of GM’s Opel unit with PSA’s 12 European manufacturing plants.
And unlike joint ventures between Volkswagen and Suzuki, or Ford and Mazda, the relationship between GM and Peugeot would not involve a blending of capital.

GM declined to comment. A Peugeot spokesman did not immediately return when inautonews ask more details.

Some analysts, including Max Warburton at Sanford C. Bernstein in London, are sceptical that the alliance will make much difference in the companies’ outlooks.

“Two wrongs don’t make a right,” he said. “PSA and Opel can’t restructure independently.

Bloomberg reports that the deal would involve a standstill agreement by which GM would not seek to take a greater holding in the Paris-based carmaker.

The Brunswick consulting firm, currently engaged by Peugeot but also serving Opel, said the details of the future cooperation were not yet clear. Brunswick suggested, “It is likely that consideration will be given to, among other things, jointly developing automotive platforms”.

But like Max Warburton from Sanford C. Bernstein we ask the same question – if happen – will make any difference?

Opel lost $747 million last year before taxes and interest. While that’s an improvement from $1.95 billion lost in 2010, it’s not break-even as Detroit-based GM had planned until November when it pulled back the forecast as the European outlook worsened.

On the same time PSA Peugeot Citroën raised its cost-cutting target, plans to sell assets, and put a brake on planned expansion in India to reverse a dramatic worsening in its finances as the French auto maker reported a sharp drop in 2011 earnings.

The family controlled company reported a 48 percent drop in full-year 2011 net profit to €588 million ($772.1 million) from €1.13 billion in 2010!

In addition, Peugeot Citroen last week forecast a 10 percent drop in car sales in its core French market this year.

News of the talks comes just ahead of next month’s Geneva Motor Show, and will undoubtedly be one of the main topics of discussion at Europe’s biggest annual car industry gathering.