PARIS PSA Peugeot Citroen (PEUP.PA) unions voiced concern on Friday over a deeper tie-up plan with General Motors (GM.N) that sources say the French carmaker is seeking to revive.
Such a move would require major capacity cuts and face serious obstacles, analysts also said - but the discussions may signal that the companies are preparing to tackle overcapacity.
The Paris-based carmaker and founding Peugeot family have repeatedly declined to comment on a Reuters report that the founding shareholder is ready to hand over control in return for a new cash injection from GM. [ID:nL5N0F32U2]
"A dilution of the family would not be good news," a spokesman for Peugeot's moderate CFTC union said.
"One of the last remaining family groups would cease to exist in its current form," he said. "It's the family attachment to the company that has preserved its French roots so far."
GM reiterated it had no current plans to invest more cash in Peugeot. The French carmaker also inconclusively explored a deal with Chinese partner Dongfeng Motor Group (0489.HK), sources have said.
"There's absolutely no question of selling the Peugeot family's stake," a source close to the Peugeots was quoted as saying by the website of France's BFM radio - without addressing a possible capital increase or dilution of their existing shares.
Under the terms of their alliance, which saw GM take a 7 percent Peugeot stake in a 1 billion euro ($1.3 billion) share issue last year, the companies already plan to pool future vehicle programs.
But they have so far avoided tough decisions on combining production to generate far greater potential savings.
Opel, GM's German subsidiary, vigorously denied media reports this week that its next Zafira minivan would be a rebadged version of the Citroen C4 Picasso.
Because of their excess capacity - with Peugeot's French factories running at 71 percent and Opel's German plants at 66 percent of maximum output - the tie-up would require politically unpalatable closures and firings.
Such questions would resurface immediately with any deeper combination of their European operations, analysts predicted.
Peugeot shares, which had advanced 5.5 percent on Thursday after the Reuters report was published, gave up some of their gains on Friday and were down 2.3 percent at 10.58 a.m. ET. GM was 0.3 percent lower in New York.
A tie-up that reduced capacity to current demand levels would eliminate 8,000-10,000 jobs at Peugeot and almost 4,000 at Opel, Metzler Bank analyst Juergen Pieper said, adding that actual cuts would likely stop far short of that.
A GM investment is unlikely to make the French government any more amenable to Peugeot restructuring, said Marc-Rene Tonn of M.M. Warburg. "Why would the state be any more likely to accept staff cuts under GM than under the Peugeot family?"
Opel employs 20,000 workers in Germany to Peugeot's 77,000-strong workforce in France. Officials for both governments declined to comment.
"An eventual dilution of the Peugeot family seems hard to avoid," Paris brokerage Aurel BGC said in a note.
"But deepening the agreement with GM would likely require a guarantee that (more) plant closures and job cuts could be carried out in France."
Morgan Stanley analyst Adam Jonas nevertheless noted "key changes at Opel in the past nine months that may make a deeper collaboration with PSA more realistic".
He cited closures already planned or underway at Peugeot's Aulnay site near Paris and Opel's Bochum plant in Germany, and new management of the GM brand under Volkswagen veteran Karl-Thomas Neumann.
With their alliance now in its second year, "the two companies should be getting increasingly familiar with each other's systems and processes", Jonas added.
Peugeot clearly needs outside cash because the family has other investment priorities, said Xavier Lelasseux, a spokesman for the carmaker's center-left CFDT union.
"If it comes from a new shareholder or GM that's no bad thing," he said. "The danger is that it would be used to buy up the strongest parts of the group to create savings for Opel, with a huge impact on jobs."
Even the hard-left CGT union said it would be open to a GM investment - while also giving a taste of how quickly that could change with further job cuts.
"It doesn't bother us as workers whether our bosses are French or American," said Jean-Pierre Mercier, who led the union's unsuccessful fight against the Aulnay closure.
Recent experience shows that "having French bosses doesn't protect our jobs", Mercier said. "Our real adversaries are the shareholders." ($1 = 0.7691 euros)
(Additional reporting by Christiaan Hetzner in Frankfurt and Alexandre Boksenbaum-Granier in Paris; Editing by Peter Graff)