GM scraps planned merger over Peugeot’s financial woes

PARIS: General Motors ( GM) has scrapped plans to merge its German unit Opel with France’s PSA Peugeot Citroen because of the latter’s mounting financial woes, a news report said last week.

“GM gave up in early November on the merger plan between Opel and PSA Peugeot Citroen’s auto division,” French financial newspaper La Tribune said on its website, citing “a well- informed French source.” The source told the paper the prospective deal was “suspended, to say the least, and in all likelihood buried.”

Instead of a merger, the carmakers will pursue a more limited partnership in four specific areas, which they had already announced on October 24, La Tribune said.

The companies had already announced in February that GM was taking a 7- percent stake in PSA Peugeot Citroen as part of a “strategic alliance.” Neither company had confirmed or denied plans for a full merger.

GM said last week that plans for the alliance were still going forward.

“The alliance between GM and PSA is progressing as planned. We are fully focused on earning the benefits from the alliance that we have identified,” said GM spokesman Greg Martin.

A PSA Peugeot Citroen spokesman said; “It’s one rumor after another. We will not make any more comments. On October 24, we announced four projects with GM. Today, we are concentrating on carrying out those projects.”

The proposed merger, the subject of much speculation in the French, German and US financial press, was aimed at combining the two carmakers’ supply chains and enabling them to jointly produce components such as chassis. With the European car market in the doldrums due the eurozone debt crisis, manufacturers are faced with heavy losses and overcapacity.

Peugeot, where sales fell by 3.9 percent in the third quarter to $16.4 billion, announced in July that it intends to cut 8,000 jobs.