Peugeot and GM Are Getting Busy
In a press conference on Thursday, PSA Peugeot Citroen announced that it would take the lead in developing the three vehicle platforms that it will share with General Motors (NYSE:GM) under a parts-buying and manufacturing agreement. This agreement is the backbone of a relationship between the two companies that is aimed at curbing spiraling losses in the European auto market.
Substantial economic maladies have plagued the European market for years. The global financial crisis helped catalyze a six-year contraction in the region’s car market, and manufacturers across the board have logged billions in losses. General Motors has lost over $17 billion in the region since 1999. Peugeot lost over a billion in the first half of 2012 alone. Ford (NYSE:F), which has a substantial presence in the European market, lost nearly $2 billion for the year.
The reaction to the collapse of the market has been severe cost cutting, plant closures, and layoffs. Every automaker in the region was forced to reduce its workforce and drive efficiencies. In the case of GM and Peugeot, it meant a mutually-beneficial component-supply agreement that should save the two companies a combined $2 billion over five years. The first joint-venture cars will be rolling off the line shortly after the region’s car market is expected to enter a recovery phase in the middle of the decade.