GM Finalizes Big Deal With European Carmaker

FRANKFURT (WWJ) - General Motors says an alliance announced today with French carmaker PSA Peugeot Citroen is about saving money, not turning around both companies European operations.

"This partnership brings tremendous opportunity for our two companies," said Dan Akerson, GM chairman and CEO. "The alliance synergies, in addition to our independent plans, position GM for long-term sustainable profitability in Europe."

The two companies will combine their $125 billion dollar a year purchasing operations, and work together to develop new products.

"We estimate the synergies between the two companies from the initial phase of the alliance at about two billion dollars annually," says GM vice chairman Steve Girsky.

Girsky said it could take five years to realize those savings. He also says the two companies will remain competitors in the marketplace.

"This is not a combination. This is not a merger. This is a targeted strategic alliance."

But both companies are losing money in Europe, and trying to stem the red ink. The deal will also help General Motors build more vehicles that will be competitive in that market.

"PSA is a very good small car builder," said Michael Robinet, managing partner with IHS Automotive Consulting. "Even though they are devoted mostly to Europe, they're very good at small cars, the size of a Chevy Cruze or a Chevy Sonic."

PSA Peugeot Citroen Charmain Phillepe Varin said the deal will also make his company more competitive.

"This alliance is a tremendously exciting moment for both groups and this partnership is rich in its development potential," he said. "With the strong support of our historical shareholder and the arrival of a new and prestigious shareholder, the whole group is mobilized to reap the full benefit of this agreement."

General Motors lost $700 million on its European operations last year. Girsky was sent to Europe to help turn those operations around. He said that effort will continue, even with this deal.

"This alliance is not a replacement for either company's independent and ongoing efforts to return their respective European operations to sustainable profitability," he said. "We look at this as adding additional tools to the toolkit."

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