GM-PSA steering committee meets, plans take shape

DETROIT Wed May 9, 2012 3:15pm EDT

A General Motors logo is seen on a Denali vehicle for sale at the GM dealership in Carlsbad, California January 4, 2012. REUTERS/Mike Blake

A General Motors logo is seen on a Denali vehicle for sale at the GM dealership in Carlsbad, California January 4, 2012.

Credit: Reuters/Mike Blake

DETROIT (Reuters) - General Motors Co (GM.N) and PSA Peugeot Citroen (PEUP.PA) are hammering out agreements for the projects they want to tackle together as part of their new global alliance, including expanding the number of vehicles they will build on shared platforms.

The alliance steering committee - made up of five top executives from each automaker -- was scheduled to meet for the first time in Detroit on Wednesday.

"Work teams are in place, meeting regularly and hopefully soon we will be able to share the first update on alliance progress," GM said in a statement, declining to comment further on the meeting.

A PSA spokesman declined to comment, but executives for the French automaker have been talking openly about their hopes for the alliance, which GM and the French automaker announced in late February with the goal of saving at least $2 billion annually within five years, split about equally between the partners.

Both automakers are struggling in Europe, where demand has drastically declined during the region's debt crisis. By combining efforts around purchasing and logistics, and eventually building cars on shared vehicle platforms starting in 2016, they hope to drive down costs.

While many analysts questioned the benefits of the alliance to GM, the U.S. automaker sees the partnership as a way to help reverse years of losses at its Opel unit in Europe.

However, the companies have said repeatedly that moves such as closing plants -- something analysts and investors would like to see at both companies -- will be done outside the alliance structure. Unions for both companies in Europe fear plant closures and job losses due to the alliance.

"All eyes are still on capacity and how does the alliance play into GM's changing their capacity plans," Citi analyst Itay Michaeli said.

Peugeot, meanwhile, lacks GM's global scale and is being hurt by its home market's troubles.

"GM is on stable footing," Guggenheim Securities analyst Matthew Stover said. "PSA is on Medevac right now. The chopper is flying. They're trying to find the hospital and it looks like it's in Detroit."

PSA executives have been very open in their desire to push the alliance beyond what was initially announced.

RAFT OF NEW MODELS

Peugeot Director General Frederic Saint-Geours told an Italian newspaper on Wednesday that the companies will launch a raft of new models on shared platforms from 2016.

"We will launch a D-segment car, a crossover, a compact minivan, and two models in the B and C segments," he said in an interview with Corriere della Sera. "After that, we will launch a shared-platform eco-friendly car."

GM and PSA initially said subcompact cars like GM's Opel Corsa and Peugeot's Citroen C3 would be based on Peugeot technology, while mid-sized cars such as the Opel Insignia and PSA's Citroen C5 and Peugeot 508 would draw on GM platforms.

Analysts said given the long lead time of about four years that auto companies typically need when planning new vehicles, GM and PSA must already be discussing the next round of vehicles on which they will cooperate.

But GM Vice Chairman Steve Girsky, a member of the alliance steering committee, said last month that GM will be deliberate in what projects it chooses to do with PSA. "There are plenty of opportunities to go deeper into this relationship, but we need to walk before we can run," he said at a conference.

PSA executives have said a logistics agreement with GM will be finalized in the coming weeks, while the purchasing joint venture could be completed in the third quarter.

The French automaker also has said the alliance may expand to include dual-clutch transmissions and a small car for emerging markets.

PSA's Asian chief specifically said last month that his company may build cars in India with GM, effectively scrapping plans for its own factory there. GM was quick to say that was not in the current plans.

GM Chief Executive Dan Akerson last month acknowledged his company's interest in PSA's diesel engine technology and said opportunities also existed in Asia and South America. He also has said there are opportunities in potential financing in Europe.

GM Chief Financial Officer Dan Ammann, another member of the alliance steering committee, told reporters last week that the partners are working well together.

He reiterated there will be no meaningful financial benefit in the near term from the alliance, with most of the major gains coming in 2015 and beyond. "The real payoff will come further out in line with the launch of some of those product programs."

(Reporting by Ben Klayman, additional reporting by Laurence Frost and Gilles Guillaume in Paris; Editing by Bernard Orr)

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