Official: GM ties the knot with Peugeot-Citroen

If you have been tuning into IAB, this shouldn’t come as a surprise. After countless speculations, General Motors - world’s numero uno manufacturer has officially tied the knot with Peugeot-Citroen, Europe’s second biggest manufacturer.

What’s the Deal?

•  General Motors will pay around $400 million for a 7 percent stake in French automaker PSA Peugeot Citroen.
• Deal will make GM the second largest shareholder in PSA, after the Peugeot family, which holds around 30 percent.
• The shares won't give GM any governance rights over PSA
• The deal is expected to close and take effect by the second half of this year.

Why did they do it?

• GM’s European operations has been constantly bleeding money. Money-losing German Opel unit needs the support of PSA for a new product direction.
• PSA is under heavy debts. It needs to support of a big manufacturer to develop new technologies and products.

What will come out of it?

• Two pillars around which the deal is built: platform sharing and purchasing.
• By merging their $125 billion in purchasing power they hope to keep supply costs down.
• Synergies resulting from the alliance will save approximately $2 billion annually within about five year
• Joint development efforts will focus initially on small and midsize passenger cars, MPVs and crossovers.
• The carmakers may also develop a new common platform for low emission vehicles, with the first model expected to debut in 2016.

[Source: Insideline.com]