Floundering French automaker PSA Peugeot-Citroen may soon be getting a new accent, reports from China suggesting one of the booming Asian nation’s larger domestic manufacturers, Dongfeng Motor, is set to purchase a 30% stake in Peugeot for about $1.6 billion.
But the proposed deal could create some problems on a global scale. Among other things, it might short-circuit the relationship Peugeot has already established with General Motors. And it could prove problematic considering Dongfeng is already partnered with the French maker’s rival, the Renault-Nissan alliance.
PSA Peugeot-Citroen has been one of the automotive manufacturers hardest hit by the ongoing European recession. It lost more than $6.5 billion last year and remains deep in the red for at least the first half of 2013. The maker has already said it will close one key plant in an effort to cope with worsening capacity utilization issues – despite strong resistance from the French government.
As part of its effort to turn things around, PSA last year inked an alliance with General Motors and its also-troubled European subsidiary Opel-Vauxhall. GM now owns a 7% stake in the French maker and together they plan to consolidate development of several product lines. The Peugeot family, which still owns a controlling 25.4% stake in the company has gone so far as to say they would back out of management if GM wanted to take control of the French maker – something the U.S. company has been reluctant to do.
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So, Peugeot has been looking for another white knight and Dongfeng appears ready to step in. The reports from China suggest the Asian maker would purchase a 30% stake, though it is unclear how much control it would take over management.
Dongfeng already produces vehicles for PSA in China, a common strategy as that government’s policies require foreign automakers to maintain a domestic partner. But, in the strange-bedfellow world of Chinese manufacturing, Dongfeng also serves as the primary partner for Nissan Motor Co. Nissan, in turn, is the alliance partner for Renault, a venture formed in 1999 with Carlos Ghosn serving as CEO of both makers.
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Such situations are not entirely unusual in China. Shanghai-based SAIC is partnered with both GM and Volkswagen AG – and produces competing products under its own brand name. But whether Nissan would be pleased with its Chinese partner holding a major – and possibly controlling – stake in as direct a rival as Peugeot remains to be seen.
And GM might have troubles with such a shift at Peugeot. There have been numerous other questions raised about the Euro-American alliance already.
Further complicating matters, anything that could threaten the current management structure – especially if it might shift control of PSA Peugeot-Citroen out of France – could run into government opposition. The Paris government has authorized a multi-billion-dollar aid package already. Meanwhile, PSA has been talking to its unions hoping to reduce labor costs. Such a deal might also be threatened, especially if workers raised concerns about possible shifts in production out of the home French market.
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