PSA’s small car program threatened by down scaled alliance image

General Motors and PSA Peugeot Citroen are really scaling back their alliance, which could be a huge hit to the French carmaker’s recovery plan – crippling its small car program.

Peugeot, which is now mulling an investment by Chinese partner Dongfeng as it fights to contain huge losses, said the small car program at the heart of the GM partnership was likely to be cancelled.

“Further analysis showed that the business model just wasn’t there,” a Peugeot spokesman said, without elaborating.

“Peugeot thought it had found a long-term partner, but the alliance seems to be disintegrating,” said Paris-based Natixis analyst Georges Dieng. “This leaves a hole in their strategy, and I don’t see how they can fill it,” he added. “Dongfeng doesn’t really offer an alternative.”

In the early days of their tie-up, Peugeot and GM revealed plans for at least five vehicle and power train programs. But that was quickly mitigated by unsuccessful negotations to set up a deeper alliance, followed by a stream of steady news announcing the duo are scaling back their joint plans. Besides joint acquisitions now underway, just two minivans have survived from “about forty” projects initially discussed, according to Peugeot programs chief Jean-Christophe Quemard. The soon to be dropped scenario called for the replacement of the Peugeot 208, Citroen C3 and Opel Corsa with a single small car platform and was “absolutely key” to the partnership between the two companies – according to analysts.

Via Reuters