The Odd Couple: PSA And GM In Alliance Talks

GM and PSA Peugeot Citroen have a mutual problem: Losses in Europe. Now, the two want to share the burden. General Motors and PSA are discussing a broad manufacturing alliance, if today's media reports from Europe are to be believed. PSA and GM? Number 2 in Europe PSA had been looking for  a partner for years. The logical ally used to be Fiat. At the Detroit Motor Show, Fiat CEO Sergio Marchionne told Reuters that "he would be willing, in principle, to be part of a consolidation that would create another car company in Europe rivaling Volkswagen AG in size. "If you take two of the European players and put them together, you're going to get the right answer," Marchionne said." Using that math, the options are limited. Even if you add the largest European players, none of them would eclipse the European juggernaut VW. Fiat's and PSA's EU market shares, added together, would be 19.6 percent, not enough to out-do Volkswagen's 23.9 percent share. There is just one combination that comes a bit closer to the target, and that is PSA and GM. Their combined share would be 19.9 percent. Neither GM nor PSA are thinking of merging though. The talks are about sharing vehicles and parts, and not about a capital tie-up, Reuters says. In the meantime, analysts in Europe are scratching their heads and ask: Why? Peugeot and GM's Opel suffer from overcapacity in Europe, while facing painful restructuring and militant unions. Both agonize under too much exposure to a stagnant EU market. Which makes Credit Suisse analyst Erich Hauser wonder: "We struggle to see how yet another 'me-too' cooperation with GM Europe on componentry will help address any of the fundamental issues."   from The Truth About Cars http://www.thetruthaboutcars.com

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