‘It Takes Two‘, ‘Two Hearts‘, the music industry has harnessed the words that seem to be the driver of humankind. A combination of good and bad relationships makes up an experience where parties grow with more understanding. For corporations, it is even necessary for competing companies to realize the talents of the best in the industry. In some cases, a talent could be so great that the old saying “if you beat them, join them!” becomes a business direction. Opportune timing ahead of the highly influential Geneva Motor Show, the latest automotive partnership was announced between General Motors and PSA Peugeot Citroen.
Made official last week, General Motor’s alliance with the French parent company of the Peugeot and Citroen brands is said to relate to several future products set to be released by both automakers. Collaborating on a common platform to be used for small and mid-sized cars as well as crossover vehicles, efforts by the two auto companies will center on reducing their individual vehicle development costs. The net result will be General Motors and PSA Peugeot Citroen first shared platform in the 2016 calendar year manufactured with less expensive, common parts. With a collective parts purchasing volume rounded at $125 billion dollars a year worldwide, General Motors and PSA Peugeot Citroen influence on automotive component suppliers is already significant.
Automotive mergers have tendency of ending catastrophically. A recent case being the ill-fated Daimler-Benz and Chrysler Corporation grouping, mergers are a heavily negotiated, temperamental procedure that results in at least one company being shamed. Alliances between auto companies have been more effective ways to benefit from joint expertise. Alliances between corporations are also better sold as a joining between two or more equals. Joint ventures can also be easier to dissolve when changes in corporate command (which it frequent and common in the auto business) are presented.
The alliance deal involves General Motors’ purchase of a sizable quantity of PSA Peugeot Citroen stock. Taking a 7-percent equity stake in PSA Peugeot Citroen, GM will become the second-largest company shareholder behind the Peugeot family’s ownership who holds just over 30 percent of stock. Despite the acquisition of shares by General Motors, the day-to-day operations of both companies as a whole will be unchanged. Peugeot and Citroen brand vehicles are still positioned in direct competition with General Motors product lines.
General Motors’ experience in the European auto market has long been eventful. In 2000, there was a proposed merger with Italy’s Fiat Group was called-off by General Motors 5 years later. As GM was seen as the savour of Fiat’s automobile company, it would be ironic that the auto companies would be found on the opposite side of the spectrum in 2009. There were also plans for General Motors to sell sizable interest in their European operations during their corporate restructuring. Making a deal short of finalization by a few remaining pen strokes, General Motors would back out angering planned investors and the German government. While a long-time holder of the Opel and Vauxhall vehicle brands, General Motors also have dealt with off-loading British sports car maker Lotus and, of course, Swedish car builder Saab.
A newsworthy announcement, the partnership is one of several intertwining interests for both automakers. PSA Peugeot Citroen list of corporate co-operations currently includes Renault, Ford, BMW, Mitsubishi and Toyota. Late last year, General Motors and BMW announced they were in discussions relating to a technical partnership. Providing few details, the talks between the auto companies were centered on the advancement of fuel cell technology.
At signing the deal, PSA Peugeot Citroen and General Motors have left the contract open-ended for potential expansion of their global collaboration.
Information source: General Motors, PSA Peugeot Citroen
Photo source: Stuart Ramson for General Motors