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GM ‘close to buying stake in Peugeot Citroën’

A General Motors-Peugeot alliance could ultimately save the US car giant bn-3bn, according to one analyst

General Motors, the world’s biggest car company, is reportedly close to buying a stake in PSA Peugeot Citröen as the two firms struggle to solve their European woes. Peugeot shares briefly soared on Tuesday on the news. Officials from both companies declined to comment.

But the European car firm’s shares ended the day down after reports that Peugeot was considering a rights issue as part of the deal. Peugeot Citröen is reportedly considering a €1bn rights offering to raise cash as its debt increases. The firm’s debts are now more than €3.4bn. GM’s plan to take a largely symbolic stake in Peugeot, believed to be around 5%, is intended to cement a proposed strategic alliance in Europe and elsewhere between the two firms.

For GM it could lower operating costs at Opel, its loss-making European unit. The firms could share vehicle platforms and technology. Peugeot, heavily reliant on the European market, would gain much-needed access to international markets while sales remain depressed at home.

GM recently announced record profits, spurred on by recovery in the US. But the firm lost 7m in Europe in 2011, its 12th consecutive annual loss, bringing its cumulative loss in the region to .4bn.

A GM-Peugeot alliance could ultimately save the US car giant bn to bn, according to an estimate by Morgan Stanley.

“Any restructuring of GM Europe would require cash resources from Detroit,” Adam Jonas, an analyst with Morgan Stanley, wrote in a note to investors. “We expect an alliance would help GM get more bang for its buck, and would not expect significant capital commitment over and above that required to initiate joint projects.”

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