GM, PSA Peugeot Citroën ink strategic alliance

General Motors and PSA Peugeot Citroën have announced a strategic alliance. The agreement is structured around the sharing of vehicle platforms, components and modules; and the creation of a global purchasing joint venture for the sourcing of commodities, components and other goods and services from suppliers, with combined annual purchasing volumes of approximately $125 billion.

Each company will continue to market and sell its vehicles independently and on a competitive basis. The platform-sharing plans will initially focus on small and midsize passenger cars, MPVs and crossovers. The companies will also consider developing a new common platform for low-emission vehicles. The first vehicle on this platform is expected to be launched by 2016. Each company will continue to market and sell its vehicles independently and on a competitive basis.

As part of the agreement, GM plans to acquire a seven percent equity stake in PSA Peugeot Citroën, making it the second-largest shareholder behind the Peugeot Family Group. However, GM will have no say in the running of the company. The shares bought by GM are part of a larger number being offered for sale by PSA Peugeot Citroën, as it seeks to raise around $1 billion to fund investments. The company's market value based on its current share price is $3.6 billion.

"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."

Philippe Varin, chairman of the managing board of PSA Peugeot Citroën, added, "This alliance is a tremendously exciting moment for both groups and this partnership is rich in its development potential."

Additionally, the alliance is exploring areas for further cooperation, such as integrated logistics and transportation. GM plans to set up a strategic, commercial cooperation with Gefco, an integrated logistics services company and subsidiary of PSA Peugeot Citroën, whereby Gefco would provide logistics services to GM in Europe and Russia.

The total synergies expected from the alliance are estimated at approximately US$2 billion annually within about five years. The synergies will largely coincide with new vehicle programs, with limited benefit expected in the first two years.