GM CEO Dan Akerson and PSA CEO Phillipe Varin when the tie-up between their two companies was announced in 2012. Now, Akerson and Varin are both on their way out and GM has sold its 7% stake in PSA, though the companies continue to jointly work on some projects.
General Motors sort of has a reputation for bad investments in Europe. In 2000, GM made a deal with Fiat wherein Fiat sold 20% of Fiat Auto to GM for $2.4 billion and the Italian automaker took a 6% stake in GM. GM also received a put option which in certain circumstances would have obligated the largest American car company to exercise that option and buy the rest of Fiat. In 2005, to get out of that deal, GM paid Fiat another $2 billion. With that kind of history, it's not surprising that when GM invested $400 million in early 2012 for a 7% share of French automaker PSA Peugeot Citroen many skeptics expected GM to lose money on that deal as well. PSA's stock prices dropped after GM's buy-in and in the fourth quarter of last year, GM took a $220 million charge on its books to bring the PSA investment down to market value. GM announced last Friday that it sold its ~24.8 million shares in PSA to institutional investors for $343 million. As a result of all that accounting the Detroit automaker will realize a net gain of $150 million, posted to the company's fourth quarter earnings as a special item.
A day before GM announced their divestment of PSA shares, the two companies said they had reduced projected annual cost savings from their alliance to $1.2 billion by 2018, down from an earlier projection of $2 billion in savings by 2017. The companies will continue to work jointly on two vehicles based on PSA platforms, a joint purchasing and logistics venture, and also work together on a new small light commercial vehicle.
GM said that their sale of PSA shares was not related to the French concern's announcement last week that it is exploring a possible capital increase and and considering commercial and industrial projects with partners. One of those partners is Chinese automaker Dongfeng Motor Group. Dongfeng and PSA recently said they would be exchanging 20% stakes after the Chinese company agreed to inject over $2 billion in PSA. Chinese media reports say that prior to its sale of PSA shares, GM gave it's blessing to the alliance between the French and Chinese automakers.
from The Truth About Cars http://www.thetruthaboutcars.com
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