GM & Peugeot Alliance, Taking Stake of YOUR Money (GM)

General Motors Co. (NYSE: GM) has just announced the creation of a “long-term and broad-scale global strategic alliance” with PSA Peugeot Citroën.  The creation aims to leverage the combined strengths and capabilities of the two companies, as well as to contribute to the profitability of both partners and to improve their competitiveness in Europe.

The focus is on sharing of vehicle platforms, components and modules; and to create a global purchasing joint venture for commodities, components and other goods and services from suppliers. 

The combined annual purchasing volumes are listed as approximately $125 billion.  The total synergies expected from the alliance are projected to be about $2 billion U.S. dollars per year “within about five years.”  GM and Peugeot Citroën will each continue to market and sell their own vehicles independently.

PSA Peugeot Citroën is expected to raise approximately 1 billion Euros through a capital increase.  This financing will be a preferential subscription right for PSA Peugeot Citroën shareholders through a bank syndicate and will also come from an additional investment from the Peugeot Family Group.  Furthermore, GM plans to acquire a 7% percent equity stake in PSA Peugeot Citroën and that will make GM the second-largest shareholder behind the Peugeot Family Group.

Could you imagine if this was a bank that was still in debt to the taxpayer?  The current government and the press would be screaming if it involved writing a check to a foreign entity rather than paying back the taxpayer. Whether or not that will be the case here remains to be seen.

FULL ALLIANCE DETAILS HERE