GM to buy 5% stake in Peugeot?

The word of General Motors and French carmaker Peugeot’s alliance is echoing in European car market. The common concern of overcapacity in a recession hit market has brought the two companies on discussion table. If the deal materializes GM is speculated to buy at least 5% stake in Peugeot. GM’s European unit, Opel, suffered estimated losses of $8 billion while the overall loss of GM in European market ran up to $747 million. A deal with Peugeot would mean lower operation costs for Opel as it would mean both companies could pool together resources to develop vehicles. Peugeot is also in dire need of overseas expansion as demand in home market seems saturated. An alliance with GM would mean an access to international market for Peugeot. None of the party was available to confirm the news.

While GM spokesperson blatantly refused to comment, Peugeot spokesperson did not immediately return calls and messages seeking comment. General Motors vice chairman Steve Girsky has been sent to Europe to supervise Opel restructuring which gives an idea of the gravity of situation. But it is clear that both companies are still in high level talks and a deal may or may not come out. Performance of Opel is a key concern for GM investors. In 2009 then-CEO, GM, Ed Whitacre decided not to sell Opel and drew a sales plan but not much effect came out of it. People familiar with the matter have reported that GM and Peugeot are discussing a broad strategic alliance designed to stem losses in Europe and cut production costs elsewhere. Analysts say that it may take more than a decade to fully realize the effects of this pact. However an interim relief for European car market is expected out of this deal. Restructuring can introduce significant complications given the delicacy of economic condition at the time being, noted Guggenheim analyst Matthew Stover last week. In his words, GM has much more to offer PSA than the other way around in the grand scheme of things.