PSA rethinks its alliance with GM because of falling revenue image

PSA Peugeot Citroen announced its alliance with General Motors could be toned down, pills as the automaker – Europe’s second-largest – had a 3.7 % quarterly revenue fall and revealed it may not reach a $1 billion savings target in 2016 as planned.

The plans for a jointly developed small-car program with GM are now “under review”, Paris-based Peugeot said on Wednesday, as the ailing company continues to lose ground to rivals in Europe, amid a two decade slump in sales.

“As a result, the announced mid-term (alliance) synergies may be readjusted downwards,” Peugeot said in a statement.

“Only this alliance could have saved them; it’s the beginning of the end,” said Florent Couvreur, an analyst at CM-CIC Securities who recommends selling the shares. “This was an alliance that was set with minimum targets and now Peugeot is all by itself. It’s losing on all counts.”

PSA, a distant European second to Volkswagen, is battling losses by cutting domestic jobs and plant capacity, while allegedly pursuing a tighter alliance with Chinese partner Dongfeng Motor Co.

Revenue went down to 12.11 billion euros ($16.68 billion) in the three months ended September 30, from 12.58 billion in the year-earlier period, Peugeot said. The carmaker is still losing European market share this year to VW and other major rivals. Currency effects also contributed to the profit decline, it said.

Via Reuters, Bloomberg