BMW Reconsidering Joint Venture with Peugeot

The auto industry has become the setting of multiple alliances because automakers must share costs for new technology to meet stricter global emission standards.

BMW AG (IW 1000/37) on Thursday said it is reconsidering a joint venture with PSA Peugeot Citroen (IW 1000/43) of France to make hybrid vehicles in light of a deal between Peugeot and General Motors.

"The alliance between PSA and GM has changed the joint venture's conditions," a BMW spokeswoman told AFP.

She said that talks between BMW and Peugeot "might result in a change in shareholders" in the venture known as BMW Peugeot Citroen Electrification (BPCE), which is evenly divided between the two automakers.

"Something has to change," the spokeswoman added.

A PSA spokesman told AFP: "PSA and BMW are examining the implications of the alliance with GM regarding the BPCE joint venture."

The French financial daily La Tribune said in a report on its website that BMW might take a majority stake in the venture, or possibly even become the sole owner.

A BMW spokesman told Dow Jones Newswires: "We will pursue the business, regardless of the changes at PSA."

General Motors Co. (IW 1000/13) agreed in February to buy a 7% holding in PSA for about $420 million, and the two companies are expected to build a broad alliance to reduce logistics, purchasing and development costs.

Meanwhile, PSA and BMW have invested 100 million euros ($127 million) in BPCE, which like BMW is based in Munich, thus expanding on a previous alliance they had set up to develop small petrol engines.

German auto expert Stephan Bratzel told AFP: "BMW was surprised when PSA launched its cooperative arrangement with GM."

He said the German automaker "is worried that know-how developed by the joint venture could fall into the hands of its rival GM."

The auto sector has become the setting of multiple alliances because automakers must share costs for new technology to meet stricter global emission standards.

In March, BMW agreed to work with Toyota Motor Corp. (IW 1000/5) on the development of lithium-ion battery cells to power more environmentally friendly cars.

Copyright Agence France-Presse, 2012

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