Peugeot Citroen warns on alliance with GM

AP News
Posted: Oct 23, 2013 5:40 AM

PARIS (AP) — PSA Peugeot Citroen warned Wednesday that its headline alliance with U.S. carmaker General Motors may produce smaller savings than originally forecast, even as it posted lower third quarter revenue.

Peugeot Citroen said it was putting a planned joint development of vehicle platforms with GM under review, and that as a result, the $1 billion in savings that Peugeot Citroen had counted on from the alliance "may be readjusted downwards."

Europe's number two carmaker and the U.S. auto giant sealed their alliance last year, with GM taking a 7 percent stake in France's Peugeot Citroen, making it the second-largest shareholder behind the Peugeot family.

The two companies said the tie-up, with plans to share vehicle platforms and pool the purchasing of components and services, would save them a combined $2 billion a year within five years, split equally.

News of the alliance trouble came as Peugeot Citroen reported its revenue continued to fall in the third quarter due to shrinking European car markets and production disruptions by workers upset at a planned factory closure.

The French maker of the Peugeot 208, Citroen C4 and other hatchbacks and sedans said its revenue for the July-September period fell 3.7 percent to 12.1 billion euros ($16.7 billion). The automobile division saw its sales fall by more, down 5.8 percent to 8 billion euros.

In a statement, the company blamed weak European markets as well as disruption to its C3 production line at a factory near Paris slated for closure. The company is in the midst of plans to shut factories and shed up to 8,000 jobs.

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Peugeot Citroen lost nearly half a billion euros in the first half of 2013, and had to get a 572 million-euro lifeline from the French government. The company is also being forced to sell assets to help fund its restructuring program as it struggles to compete in Europe's morose car market. It expects the European market to decline 4 percent this year.