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Could Fiat/Chrysler Make a Bid for Peugeot?

Marchionne hints he may try to outbid GM for French alliance.

by on Feb.29, 2012

Might Fiat/Chrysler CEO Sergio Marchionne be the spoiler in talks between GM and Peugeot?

Might the Fiat/Chrysler alliance try to outbid General Motors to set up a global automotive powerhouse with French automaker PSA Peugeot-Citroen?

It’s clear that Fiat/Chrysler CEO Sergio Marchionne sees that as a potentially powerful alternative to letting PSA tie up with General Motors.  As reported this week, GM is apparently seeking a 7% stake in the French company, while the two partners would set up a series of joint ventures to develop new products and powertrains.

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But according to a report by Dan Howes, of the Detroit News, Marchionne is ready to step in as the spoiler.  He previously considered an alliance with Peugeot, having approached the French maker with the idea of an alliance during the Geneva Motor Show three years ago, even as Fiat was considering the option of buying GM’s struggling Opel division – then on the auction block.

According to Howes, a well-placed source suggested a Fiat/Peugeot deal “solves a whole lot of problems internationally and otherwise.”

There’s been a rush, of late, to line up global alliances.  That reflects the belief – often quoted by Marchionne and other industry executives like Renault/Nissan Alliance CEO Carlos Ghosn – that only the biggest of the mainstream automakers will ultimately survive an inevitable industry shake-out.  In fact, Ghosn has put his corporate money where his mouth is by lining up a third partner in Daimler AG.

A GM-Peugeot partnership would reportedly focus on product and powertrain development, as well as combined purchasing efforts intended to improve economies of scale.  The U.S. maker is clearly hoping it would be able to use the alliance to nurse its long-struggling Opel brand back to health. Peugeot, meanwhile, would like to raise some cash, cut its debt, and further expand its operations outside of economically depressed Europe.

Marchionne would likely see the same opportunities.  And he has already gained some insight into Peugeot through an existing joint venture.  They jointly produce a line of light commercial vehicles for the European market.

There are clear opportunities to cooperate in other markets, as well – China, notably, where Fiat, Chrysler and Peugeot are all chasing market leaders GM and Volkswagen, as well as Latin America, where Fiat is one of the most powerful players – especially in Brazil.

While Peugeot has confirmed it is talking with GM, the U.S. maker continues to issue a “no-comment.”  That likely reflects its caution about any new alliance.  It had a series of well-publicized failures in the years leading up to its 2009 bankruptcy – notably having to hand over $2 billion to Fiat to abandon their flawed partnership.  Industry analysts, as has reported (Click Here) are mixed, at best, in their appraisal of a GM-Peugeot alliance.

Could Fiat step in?  Might GM fight back or simply walk away?  We could find out soon, but there will likely be some interesting backroom conversations at this year’s Geneva Motor Show, which gets underway next week.

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