The European automobile market is buzzing with the word that General Motors is going for an alliance with Peugeot, the car maker from France. With the automobile market also being affected by the ongoing recession in Europe, both the companies are facing a similar problem of overcapacity and hence have been forced to come together to work out a common solution. If the discussions are successful, then it is expected that General Motors is going to acquire a minimum stake of 5% at Peugeot. It is being estimated that the European unit of GM, Opel has suffered losses of around $8 billion whereas the total loss that GM has suffered in European markets has been around $747 million. If GM is able to work out an alliance with Peugeot, Opel will be able to significantly bring down its operational costs as the two companies can combine their resources for developing vehicles. It will be beneficial for Peugeot as well as the company will be able to make use of the GM platform to record greater international presence, something it needs to do as early as possible given the saturation that its domestic market has reached. Officials from both the car makers, however, have not yet confirmed this news.
When queried about the above situation, the spokesperson from General Motors did not make any comments whereas his counterpart in Peugeot was not even accessible and did not return any messages or calls. Steve Girsky, Vice-Chairman, General Motors is presently on a trip to Europe for supervising the restructuring of Opel. This points out to the fact that the present situation is being treated with a lot of importance. What is however clearly evident is the fact that the two automobile manufacturers are having high level discussions, which could bring forth a positive outcome. Ed Whitacre, the erstwhile CEO of General Motors, had taken the decision of not selling Opel in 2009. He had alternatively devised a new sales plan, which did not bring about any sound results. Some sources, who are closely monitoring this development, have stated that General Motors and Peugeot have been broadly discussing on creating a strategic alliance that would enable both of them stop the losses that both of them are facing in the European market and also enable to bring down their costs of production elsewhere. However, the impact of such an alliance is not going to be immediate, feel experts, who feel that it is going to take more than 10 years for its effects to be fully realized. However, the pact could be providing temporary relief to both the aggrieved parties in the European context. Automobile experts are of the opinion that Peugeot will be the more significant gainer compared to General Motors if the deal is materialized.
