GM and Peugeot to join forces, sources say

By Paul A. Eisenstein, The Detroit Bureau

General Motors and PSA Peugeot Citroen have confirmed the creation of a “long-term and broad-scale” strategic alliance they expect to contribute to improved profitability and competitiveness, especially in the weak European market where both makers have been struggling.

As part of their new partnership GM will take a 7 percent equity stake in the French manufacturer, becoming the second-largest shareholder in PSA after the founding Peugeot family, which will continue to hold a one-third stake in the firm.

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

There will be two main pillars to the alliance, the makers revealed:

The sharing of vehicle platforms, components and modules; andThe creation of a global purchasing joint venture for sourcing of parts and service.The combined entity will be responsible for about $125 billion in annual purchasing.

Additional opportunities will be pursued by the two partners, GM and Peugeot suggested, including integrated logistics and transportation. 

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The two companies will continue to operate as independent organizations, however, especially when it comes to vehicle marketing and sales.

Along with its decision to enterinto an alliance with GM, PSA Peugeot Citroen plans to raise approximately 1 billion Euros (about $1.35 billion) in additional capital to help fund its global expansion efforts.

“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,” said PSA board chairman Phillippe Varin.

While an official announcement did not specifically address the issue, GM is believed to be accepting a standstill agreement that will prevent it from increasing its stake in PSA beyond 7% without approval of the French maker’s board.

Specific details of the joint platform and component efforts will likely not be detailed for some time but it is believed that GM could assume control of utility vehicle development – what the Europeans refer to as Multi-Purpose Vehicles.  The makers confirm their joint efforts will cover small and midsize passenger cars and crossovers, as well. 

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A joint statement also noted that “The companies will also consider developing a new common platform for low emission vehicles,” adding that, “The first vehicle on a common platform is expected to launch by 2016.

In all, the makers said they expected “total synergies” from their alliance to total about $2 billion within five years, and that “the synergies will be shared about evenly between the two companies.”

Though there could be clear global advantages, it is clear that both makers expect the alliance to be particularly beneficial in Europe, where each has been struggling.  That’s particularly true for GM, whose troubled Opel division failed to achieve a promised turnaround in 2011, instead running about $747 million in red ink and seriously depressing an otherwise dramatic revival for the parent company.

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While some analysts have praised the overall alliance structure, Jim Hall, of 2953 Analytics, insists “this won’t solve Opel’s problems,” since that is largely an issue of a weak brand image, he stressed.

But GM clearly believes that there are better opportunities than the skeptics contend.  And it may have no choice but to give the partnership approach a try.

The U.S. maker nearly sold off a controlling interest in Opel in the months after it emerged from bankruptcy protection in 2011 – ultimately calling off a planned sale to a Russo-Canadian partnership headed by super-supplier Magna International.  But the situation has, if anything worsened, since then for Opel. 

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Despite GM’s upbeat expectations, the maker clearly knows that alliances can go sour – as happened with a brief partnership with Italy’s Fiat.  It cost General Motors $2 billion to exit that deal, a pay-out that only hastened its collapse in 2009.

But industry analysts do agree that alliances appear to be the way of the future in an increasingly competitive auto industry.  Peugeot already has partnerships in place with both BMW and Ford, though another with Mitsubishi failed to materialize.

Other alliances are popping up across the industry, including a fast-expanding partnership between the Renault/Nissan Alliance and Germany’s Daimler AG.

The challenge, analysts caution, is lining up deals that provide similar mutual benefits.

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GM parts crunch forces work completed

DETROIT - General Motors co. said Thursday that a lack of parts from Japan, production at the plant to stop next week enforced pickup in Shreveport, La..

It is the first time a U.S. based automaker production in North America, parts lack earthquake and tsunami in Japan was ended after last week.

The Japanese automotive industry remained largely the earthquake hobbled industrial northeast to waste, although some manufacturers announced, resume limited functioning.

Installations for the production of repair or replacement parts will start Toyota, the world's top car maker, on Thursday. However, the company, said that its assembly plants in very Japan on next Tuesday keep closed it would the production of 95,000 vehicles.

GM makes the GMC Canyon, Chevrolet Colorado of small pickups in Shreveport. The company will not say which parts of it shortly on is, but both pickups use a five-speed manual transmission Japanese supplier Aisin Seiki.

GM's other North American plants still not so far affected. GM said it production as soon as possible resume. It has a 70-day supply of two pickups

Ford Motor and Chrysler Group, said that their plants of bottlenecks have affected not.

Traders increasing prices
Movement of popular cars like the Toyota Prius, the car was the disaster many slow. And many traders are already the advantages of the lack of expected to increase prices.

Buyer must now usually to pay sticker prices, instead of enjoying discounts are the norm for small cars and hybrids from Japan were imported. In addition to the Prius, the models include the suddenly more cost Honda insight, fit and CR-V; Toyota Yaris; and several Acuras and Infinitis.

Small cars such as the Yaris, with a sticker price of $12,955 for a base model and the Honda insight, priced at $18,200, lose their typical discounts of 5% to 10%.

The price increases "last weeks if not months," says Jesse Toprak, Vice President of industry trends and insights for TrueCar.com, a website that tracks, what cars for to sell.

Traders trade on the possibility that disruptions in the auto supplies from Japan lead to, a lack of higher demand vehicles that are. Demand will exceed supply.

So she offers sections on these vehicles, Toprak says.

Car buyers numbers rarely sticker price, also known as the EIA or suggested retail price of the manufacturer. Companies offer usually discounts from a few hundred to several thousand dollars from the EIA. Many of you offer low funding.

About all this, it is typically more room for negotiation. Toyota, had such as the bonus on the Prius, plus zero-percent financing offers a $500. And there is a $1,000 discount on the Yaris offered.

In Japan, where automotive industry in the aftermath of the earthquake, tsunami and nuclear crisis has stopped are based many small cars and hybrids.

Before the disaster, traders were a lack of hybrids like the Prius, reporting that had been demand because of higher gas prices. The Prius uses a combination of electric and gasoline power and gets 51 mpg.

'We run of cars'
A month ago, Dave Conant, said his Toyota dealer in San Diego 57 Prius hybrid for sale have. Today, he has three or four. Priuses carry a sticker price of $23,050 for a base model.

"We're going to run cars," he says.

So, he is no longer prepared to do business.

The disaster in Japan all changed. Before the last week had been increased production of Toyota Priuses. Traders wanted to sell as many as possible. But now, says Conant, he and other merchants are no longer prepared, their fuel sell cars for less than the sticker price are.

"We not had five on the floor yesterday, and I know, when I," he says. "The market has moved quickly and dramatically."

Some critics argue that dealers who lack, as a pretext, prices increase Japan disaster, and the threat by car use. Eric Ibara, Director of the remaining price advice for Kelley Blue book, says any price increases on the market are "pure speculation", now that some models face labour shortages.

Toyota declined to comment.

Honda spokesman Jeffrey Smith says that the automaker is the impact of the crisis on the supply of cars Japan review. But now, merchants have enough Japanese imports on page, and there are more on the way, he said.

Infiniti announced prices increases Monday for about half of their models. Buyers will pay more $400 to $950 per model. But Infiniti spokeswoman Paula Angelo says the price increases on the Japan disaster related.

"It is our usual practice to make mid model year price adjustments," says Angelo.

Used car prices
Used cars can be also affected. Higher prices on new cars means higher prices where used, says Tim Jackson, President of the Colorado Automobile Dealers Association. As soon as supplies of small cars and hybrids to tighten up and dealer end negotiations on the price, many customers lower their sights. Cheaper used cars become more attractive.

That higher demand pushes prices.

"Dealer pays more auctions or for repurchases, and it will result in a higher price to the consumer" Jackson says.

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