GM to buy in to France's PSA Peugeot Citroen: report

02-28-2012, 14h18

US auto giant General Motors is to acquire up to seven percent of France's PSA Peugeot Citroen which will raise one billion euros ($1.35 billion) through a share sale, reports said on Tuesday.

The Wall Street Journal cited a source familiar with the talks who said that the Peugeot family, which controls 30.3 percent of the capital and 45.75 percent of voting rights in the firm, intended to subscribe when the shares went on sale.

French business daily Les Echos reported earlier on Tuesday that General Motors was in talks to obtain an interest of five percent in PSA Peugeot Citroen, France's biggest car manufacturer.

The paper cited sources close to the negotiations as saying the deal was a so-called standstill agreement in which GM could not increase its stake in Peugeot without prior permission from the car group.

Other reports have said GM's stake could be up to seven percent.

Last week French Labour Minister Xavier Bertrand revealed that GM and Peugeot were in talks towards a strategic partnership, confirming a report on a website.

Contacted by AFP, both Peugeot and GM refused to comment.

Peugeot is France's top car manufacturer, ahead of Renault, and Europe's second, behind Volkswagen of Germany.

Last year, the firm, which employs 205,000 people worldwide, sold 3.5 million cars around the world, two-thirds of them in Europe where the market is under pressure as the economy slows sharply.

Peugeot shares stabilised Tuesday afternoon after jumping eight percent in the morning to 15.32 euros.

Bertrand said last week that Peugeot chairman Philippe Varin had told him the deal would allow the French group to cut its production costs.

The minister said the talks were broadly good news but that his government was seeking assurances French jobs were safe. President Nicolas Sarkozy is seeking re-election in eight weeks and Peugeot is a major French employer.

The French state helped bail-out both Peugeot Citroen and its rival Renault during the recession that followed the 2008 credit crunch but does not hold a stake in the group. It will nevertheless watch the talks closely.

The Financial Times has reported that the alliance would see Peugeot and GM's European subsidiary Opel Vauxhall jointly developing parts and engines in Europe for vehicles sold under their respective brands.

PSA revealed last month that it was open to the idea of an international alliance but rumours had earlier focused on a possible tie-up with the US and Italian group Fiat-Chrysler.

PSA's sales fell 1.5 percent last year and its net profit was cut in two, to 588 million euros ($777 million).

The group already has cooperation agreements with Germany's BMW to build petrol engines, with Italy's Fiat and Turkey's Tofas to build light trucks, and with US giant Ford for diesel engines.

It works with Japan's Mitsubishi to build SUVs and electric cars, with Toyota for small cars and with its historic French rival Renault to build motors and mechanical parts.

But the group has struggled to compete globally with industry mammoths like GM, Toyota and Volkswagen and auto alliances such as Renault-Nissan and Fiat-Chrysler.