When General Motors teamed up with and purchased a seven percent stake in French automaker PSA Peugeot Citroën for $335 million in February of 2012, the Europe-only deal was pitched as a way to slash costs in Europe — a market that was and still is faced with significant manufacturing overcapacity, and slumping consumer demand. Since the initial announcement, General Motors and Peugeot have solidified the ways in which the two automakers will collaborate, identifying the co-development of certain future vehicles and integrated logistics operations as the pillars around which to build the partnership.
eSince the partnership was announced, several factors have changed — making us wonder whether GM really needs to be involved with the French automaker, and to what extent.
1. Vehicle Co-Development
As part of the agreement, GM and PSA Peugeot Citroën will “begin sharing select platforms, modules and components on a worldwide basis” — all in an effort to achieve cost savings, gain efficiencies, leverage volumes and advanced technologies, as well as to reduce emissions. The partnership currently calls for the following development projects:
- A joint program for a C-segment-MPV for Opel/Vauxhall and a C-segment CUV for the Peugeot brand
- A joint B-segment MPV program for both groups
- The co-development of an upgraded low CO2 B-segment platform to feed Opel/Vauxhall and PSA’s next generation of cars in Europe and other regions
The initial agreement contained plans for to jointly develop mid-size vehicles, although that project seems to have been scrapped.
More than any other element in the partnership, the joint development of platforms and vehicles seems to be the most troublesome to us, as it has the potential to drain engineering prowess of the jointly-developed vehicles (and their respective segments) from GM-Opel, increasing the difficulty with which GM could to re-enter the segment with an offering of its own, when/if the partnership is dissolved.
Even more concerning is the seeming lack of an answer to the question “why?”. Why does GM-Opel need to co-develop the aforementioned vehicles with PSA Peugeot Citroën — a regional automaker without any truly exceptional vehicles, and no global vehicles — when The General itself is a global engineering, design, development, and manufacturing powerhouse? As it stands, perhaps GM needs to increase (or improve) its own internal R&D efficiencies before jumping head first into co-developing products with Peugeot while losing the ability to re-enter the segment in the future. And why does GM even need a lackluster and underperforming auto manufacturer such as Peugeot to assist with the development of these vehicles in the first place?
2. Buick Muddies Things Up
The recent alignment of Opel-Vauxhall and Buick into a global hybrid brand further muddies the relationship with PSA Peugeot Citroën. Whereas before it was all about Opel-Vauxhall and PSA Peugeot Citroën, it’s very possible that GM’s premium Buick brand is now involved in the relationship as well. Even though its involvement may be indirect and be limited to sharing some vehicles with Opel, it still complicates the relationship nonetheless.
The only way in which Buick’s involvement wouldn’t obfuscate the situation is if Opel’s partnership with PSA Peugeot Citroën were limited to the three programs and vehicle segments outlined above. However, rumors are swirling that the next-gen Opel-Vauxhall Astra — which serves as the basis of the Buick Verano/Excelle GT — will ride on a common PSA Peugeot Citroën and GM-Opel platform. This would be troublesome if the platform in question would be different than the D2XX architecture that will underpin the next-generation Chevrolet Cruze, along with its various variants.
3. Sourcing, Distribution, And Logistics
The only project of the GM-Opel-Peugeot relationship that makes sense to us is the one that involves cutting costs by combining sourcing, distribution, and logistics operations. By doing so, both parties increase their operations and will be able to take advantage of greater scale economies.
In fact, GM has already transferred the majority of its logistics business in Europe to Gefco — a wholly-owned subsidiary of PSA Peugeot Citroen. The agreement has an effect on the majority of Opel/Vauxhall, Chevrolet, and Cadillac logistics activities in Europe (including Russia) as well as auxiliary services such as material and component deliveries to manufacturing plants, delivery of finished vehicles to dealerships, and the transport of aftersales spare parts to distribution centers.
The move, according to GM, allows it to “focus its internal resources on [its] core automotive business”, rather than tying up resources on logistics operations. The General expects to realize roughly $2 billion annually in savings between itself and Peugeot Citroën within about about five years —- a move that is expected to bring GM Europe to a break even point by 2015. Greater cost savings will come in the form of a larger sourcing and purchasing operation, with combined purchases estimated at $125 billion a year.
4. Possible Latin American Expansion
Then there’s this possibility: a collaboration between GM and PSA Peugeot Citroën in Latin America and other emerging markets. According to both alliance partners, the Latin American efforts will only take place if the relationship goes well. But, at the expense of sounding repetitive, why?
Why does General Motors need Peugeot’s help in expanding its presence into Latin America? Is it not big enough to do it by itself? Does it need a partner, with its own interests, strategies, and points of view, to pull it in different directions during said expansion? And why can’t GM simply take care of it alone in the region?
So of the four projects on which GM and PSA Peugeot Citroën might collaborate, only one seems to make the most business sense, while the others have the ability to put The General at a noticeable technological and engineering disadvantage. Undoubtedly, the collaboration is being pitched as a way to weather the slumping European economy and related slump in new car sales and cut costs, but we wonder if GM would have been better off by not partnering with the French automaker, weathering the European economic storm itself, and retaining technology and platform development in-house. Perhaps doing so would result in prolonging the break-even period for Opel, from 2015 to 2016 or 2017… but during this time, PSA Peugeot Citroën would have already run out of financial resources — and been eliminated (read: no bailout due to lack of competitive potential). Interestingly, the death of Peugeot would have definitely helped with the overcapacity/low demand part of European region. Whatever happens, let’s hope that GM doesn’t feel obligated to take over PSA Peugeot Citroen entirely, an idea that seems to have crossed the minds of some executives at the French automaker.
Comments
I can’t see the French government letting PSA die. I can see the Peugeot family eventually relinquishing control, but not to a Chinese company. I can see a bailout similar to what Chrysler went through, but then who would be the suitor? Toyoda, Honda, Mazda, SAIC, Ford, maybe GM?
I would be a bit surprised if GM ended up with them. With Akerson hell bent on profits over market share, he would not pay a penny more for the company, though he’d probably be happy to take a restructured company like Fiat did. Should this happen, GM would pickup 25% to 30% of additional volume and then could see additional savings and potential profits.
If the circumstances are right, I’d like to see it. And I definitely would not want to see PSA die and be replaced with beige imports from developing countries like what happened here. PSA brings a flavor that few other automakers have ever done.
I like partnerships, fuel cells with Honda as an example, but have had issues with the PSA deal from the start in that the move only seems to aid PSA. This, of course, would be different if PSA became a GM customer buying items such as platforms, components and technology, and I would support such a move with any automaker in that such a move into the demain of vendor would certainly boost profits.
I understand the notion of outsoursing any Opel that does not fit into the new Opel-Buick “hybrid brand” (Corsa comes to mind) in that these cars now become non-core products–even though they represent a huge chunk of bread and butter sales; however why bother when GM will nonetheless need to develop a Chevy sister (Spark) in Korea? What will happen to Chevy/Buick plants in China that prosuce C segment cars?
The partnership only works from the aspect of sharing factories but even here GM is placed at a disadvantage due to higher French labor costs/laws. Did GM plan to outsource Opel in its entirety before PSA hit the skids? It seems that all talk now centers around Latin America and PSAs desire to re-enter Indi which will never occur without a huge capital partner.
I get a sinking feeling GM wants to full a FIAT and take over PSA for one dollar and some promises.
This would make GM the world’s largest automaker once again and provide the company with a stable of 3 bangers and advanced transmissions. I dread such a move and would sooner see GM partner with PSA in NA and India like they do in China with Wurling.
Note to GM: Buy MAZDA and take over the world withoutbthe headache of storied yet doomed Old Europe dinosaur.
This really makes my blood boil, let PSA die. PSA don’t have a car in their range that would get me into one of their showrooms, their quality is suspect also. Why should GM whoms cars are very competitive lower the standard? a French Corsa or Zafira no thank you a warmed over Peugoet or Citroen no thank you. Pull out of this deal ASAP GM not only will it tarnish your reputation it also compromises things within GM.
I do not wanna see PSA die and thier cars are actually rather good. The problems here are PSA is regional and that PSA has little to offer a thriving GM aside from scale.
Psa would be a distraction.
Sure, beauty lies in the eyes of the beholder…
And in my eyes, the current Citroën C4 is a beauty. The MVPs Citroën C3 Picasso and the earlier Xsara Picasso were beautiful. The Peugeot 208 is back to the design qualities of the famous Peugeot 205 (I owned 205s for about a quarter of a century, and was very satisfied with it, including its Diesel engines).
Especially in design, Opel and GM in general could profit a lot by handing over the design to the PSA design studios.
I like G M should outsource all E U only cars to PSA. Anything that is not global is a distraction and not really worth the time.
PSA can make sure that these cars have uniquely Europe powertrains and maybe even handle 3 cylinders for The General.
Opel needs to focus on the cars they can share with Buick or even Chevy in Latin America. If G M Europe capacity were not an issue, I would suggest that these cars come off PSA lines, and maybe this could happen if G M maybe build midsized sedans on Epsilon 2 for PSA–the technology is good but no more unique than anyone else’s.
The investment in PSA has already paid for itself, plus G M gets stock.
This deal may not be glamorous but it will help.
In todays market nearly all companies are to the point they need help in development with a partner in some way. Many are working tightly or loosely on new projects to help spread out development cost.
While this is not a deal where GM would get much technology in return it would help GM share the cost of development with their own projects. I do not see this as a big deal and how it will hurt GM in anyway. PSA chips in on development on new platforms etc. and GM and PSA save in their spending. GM also gets paid back in the share of the company they own.
PSA can also help with rally cars and Diesel other deals were GM may want to participate and can show a lot of savings here.
Think of this as not a marriage to the centerfold but to the farmers daughter that can do the glamorous work.
In the end I do not see GM with much to lose and a lot of cost spread out more for more savings.
Opel lacks lighweight (and safe at the same time) chassis platforms. Opel cars are 150-200kg heavier, comparing to other models recently introduced in Europe. It affects their performance, especially with low-emission engines required by EU law. Gaining lightweight chasis technology from PSA would be a great benefit.
All of GM’s next-generation platforms, including D2 and E2, among others, will be extremely weight competitive. This is a non-starter.
Also GM has excellent diesels too, PSA gives nothing
GM began very late to produce and develop Diesel engines, and PSA is still far ahead in Diesel technology, I presume.
You might take a look at the Peugeot 908 diesel-powered racing car which fought with the Audi diesel-powered racing cars at the Le Mans 24 hours.
“joint expansion of GM-Opel and PSA Peugeot Citroën into Latin America”
Are there any sources for a planned greater expansion of Opel into Latin America?
It’s not so much about bringing Opel to Latin America as it is about jointly cutting costs there (logistics, purchasing, etc.) and jointly expanding. I didn’t reflect this clearly in the article, and have since edited for greater clarity.
There have even been whispers of joint sales (dealership) efforts in the region between GM and PSA, as PSA wants to broaden/expand its presence outside Europe.
Thank you for your answer!
In my opinion a possible support by GM to help PSA to expand in Sout America without introducing Opel doesn’t also make any sense! In this case there would be a new competitor for GM there. The only benefit would be reducing costs in SA! But is reducing costs in SA necessary if GM currently earns a lot of money there?
The bottom line here is if GM can partner an save money with out losing quality or being hurt in any way then this is a good deal.
If it cost them money or tarnishes them in anyway then don’t do it.
Only those inside GM can answer this and I suspect that if it was a money loser they would not be thinking about it or doing it.
This is one issue no one here can answer unless you are well placed and can not speak of it in public anyways.
“The bottom line here is if GM can partner an save money with out losing quality or being hurt in any way then this is a good deal.”
Foregoing (by transferring to PSA) R&D efforts on vehicles such as the ones mentioned in the article puts GM at a long-term engineering and development disadvantage.
Let’s not forget that continuous innovation is key in the automotive industry today. By not using its own technology in the particular vehicles and segments being transferred to PSA, GM is losing out on the ability to improve gradually and continuously.
This, in effect, has the ability to “hurt” them in the long run in relation to engineering/development talent, and can put them at a flexibility disadvantage as well.
I feel like GM will argue that they need PSA at some point for this reason and then buy the company. At the same time, I have trouble believing that GM wants to end up in a Mazda-like position down the road unable to build in certain segments without outside help.
What does this deal mean for GM Korea who designs small cars? Will GM transfer tech to PSA in order to share factories?
I honestly don’t think the deal is necessary GM can make Opel profitable in Europe again without the deal with PSA I know it.
GM working to co develop cars with PSA makes me wonder what is GM getting out of this? What cars will GM be getting out of this? If you told me that the small cars GM builds would be able to be built at a fraction of the cost then I would be all for it, But it looks like to me GM will be giving more then PSA will be giving!
Hope this is only a short term move & I also hope mainstream models and bread & butter models won’t be getting the PSA treatment. If GM are developing a small A segment car or small mpv (maybe both) Agila replacement for developing countries around the globe to serve as a budget model this makes some sense, lowering standards & quality on the rest of the range however don’t make any sense.
Hope it’s not a case of shutting many of GM’s European factory’s just to keep PSA happy & theirs open. To neutrals looking in wondering what all the fuss is about it would be like putting a peugoet badge on one of GM’s full sized trucks. That’s how most Europeans feel we are passionate about our brands too.
GM I getting some limited technology here.
The real benefit is the economics of scale with a MFG that is a limited competitor.
Who is Peogeot to share platforms with GM, let PSA die and GM could benefit from the this death by acquiring Gefco totally.
PSA can no longer afford R&D. Let GM sell PSA platforms andnassorted tech as a vender. This way GM maintains full control, earns more money and still has a factory partner which would be great in Latin America.
I loved Penskie’s idea of buying Saturn and retailing other people’s cars. Such a move would save PSA while expanding GM scale which is a win/win. Why in 2013 does a regional automaker need to waste money on platform development? I doubt GM will let PSA lead any project outside on Opel’s compact range which is a non core business given that Gamma is the company’s lightest platform.
PSA is a regional automaker which is confronted to financial problems, and GM has to make the break with Opel’s lost within 2015. Opel could built the next C5 and C6 in its facilities in Germany that’s will bring money to Opel; but for the rest, unless Gefco GM has no need to co-develop cars with Peugeot.
This plan seems okay for GM when it comes to Euro only models which must be a drain on the company considering thier limited sales reach.
Is GM really loosing anything by not producing the nezt gen Zafira? They will still need to master the same R&D for the segment while building Chevy Spin.
GM needs to give up on some segments in Europe due to paltry sales sofarming these projects out seems harmless. It is no different that Toyota lookibg to Mazda for the next Yaris.
GEFCO is no longer “a wholly-owned subsidiary of PSA Peugeot Citroen”. PSA sold a 75% stake to RŽD (Rossijskie Železnye Dorogi). the Russian railway company.
Nonetheless, a cooperation of PSA and GM Europe in logistics may be beneficial by pooling trains composed of both PSA and GM cars, instead of running pure PSA and GM/Opel trains. For example, both companies have factories in Spain, which produce not only for the Spanish market, but for all of Europe (and beyond). Both might share trains for transporting cars and parts to Russia, for example, too.