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GM and Peugeot to Forge an Alliance in Europe

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General Motors CoMounting losses and pressure to reduce production cost has prompted General Motors (NYSE: GM) and Peugeot to forge a manufacturing alliance in an ailing European automobile market.

According to sources close to the matter, talks between GM, the world’s leading automaker, and European No.2 Peugeot are focused on sharing vehicles and parts rather than swapping stakes. Sources also revealed that any new shareholdings emerging would be small and symbolic.


Meanwhile French Labor minister, Xavier Bertrand confirmed on Wednesday that Government had been informed about the possible tie-up. French Daily, also reported on Wednesday that talks over an alliance went for months. Yesterday’s revelation sent Peugeot’s share price soaring.

However, there were no comments from both companies. While Peugeot confirmed the discussion, it did not confirm the partner, GM said that the Company routinely conducts discussions with others in the industry and it would not like to comment beyond that.

While Peugeot shares climbed up as much as 3 euros, or 21 percent, and were 13 percent higher at 1524 GMT, the biggest one-day gain in three years, GM shares were down 0.1 percent.

For Peugeot, Wednesday’s sharp u-turn was notable as the Company’s share declined 50 percent over the preceding 12 months – the worst performance on the 15-member Stoxx Europe autos and parts index .SXAP.

While Peugeot’s core automotive division witnessed 497 million euro ($659 million) operating loss in the second half, GM Europe’s $600 million fourth-quarter loss was little changed from the earlier year’s.

In a note to its clients, analysts at Natixis said that the new alliance could prove to be a ‘game changer’ for Peugeot in the medium term. Natixis also changed the ratings of the company from ‘neutral’ to ‘buy’.

Even though Peugeot has identified potential synergies from new alliance, the company avoided to build too much expectations and excitement as its previous decision to tie-up with Mitsubishi failed in 2010.

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edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.


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Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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