General Motors and Peugeot Discuss 'Strategic Partnership'

Peugeot, France's top car manufacturer, already has alliances with Germany's BMW to build petrol engines, with Italy's Fiat and Turkey's Tofas to build light trucks, and with Ford for diesel engines.

General Motors and French car maker PSA Peugeot Citroen are considering a "strategic partnership," French Labor Minister Xavier Bertrand said Wednesday.

"The chairman of the group informed me last night about discussions for a strategic partnership and told me it was good news for the group," Bertrand told Europe 1 radio earlier this week.

Bertrand said Peugeot Chairman Philippe Varin told him the deal would allow the French group to cut its production costs, but he would not say whether the plan is for a full merger or a simple alliance.

The minister said the talks are generally good news but that his government is seeking assurances that French jobs are safe. President Nicolas Sarkozy is seeking re-election in nine weeks and Peugeot is a major French employer.

The French state helped bail out both Peugeot Citroen and its rival Renault during the recession that followed the 2008 credit crunch but does not hold a stake in the group. Nevertheless, it will watch the talks closely.

"The government does not interfere in decisions taken by big private groups, but obviously we're watching the situation at PSA closely because it concerns French industrial strategy and jobs," said Budget Minister Valerie Pecresse.

Peugeot confirmed that it is in talks with other carmakers, without identifying GM, and the business daily Les Echos said the two groups are planning to announce their alliance at the Geneva Motor Show next month.

"In the context of its globalization strategy and improving its operational performance, PSA Peugeot Citroen looks at potential cooperations and alliances," the firm said in a press statement.

"Discussions are taking place and there can be no certainty at this stage that these discussions will result in any agreement," it said.

General Motors also refused to confirm the deal, saying simply: "GM regularly holds discussions with others in our sector but wishes to make no comment on this specific information."

Peugeot Has Struggled to Compete Globally

Peugeot is France's top car manufacturer, ahead of Renault, and Europe's second, behind Volkswagen.

The Peugeot family controls 30.3% of the capital and 45.75% of voting rights in the firm, which effectively took over French car manufacturer Citroen in 1976.

Last year, the firm, which employs 205,000 people worldwide, sold 3.5 million cars around the world, two-thirds of them in Europe, where the market is under pressure as the economy slows sharply.

The Financial Times reported that the alliance would see Peugeot and GM's European subsidiary Opel Vauxhall jointly developing parts and engines in Europe for vehicles sold under their respective brands.

PSA revealed last month that it was open to the idea of an international alliance, but earlier rumors had focused on a possible partnership with Chrysler.

PSA's sales fell 1.5% last year and its net profit was cut in half, to 588 million euros ($777 million).

The group already has strategic alliances with Germany's BMW to build petrol engines, with Italy's Fiat and Turkey's Tofas to build light trucks, and with Ford for diesel engines.

It works with Japan's Mitsubishi to build SUVs and electric cars, with Toyota for small cars, and with its historic French rival Renault to build motors and mechanical parts.

But the group has struggled to compete globally with industry mammoths like GM, Toyota and Volkswagen and auto alliances such as Renault-Nissan and Fiat-Chrysler.

Copyright Agence France-Presse, 2012

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