April 5, 2012 / 4:03 PM / 5 years ago

Peugeot and Ford end cooperation on larger diesels

3 Min Read

Visitors walk on the Peugeot booth during the second media day of the 82nd Geneva Car Show at the Palexpo Arena in Geneva March 7, 2012.Denis Balibouse

PARIS (Reuters) - PSA Peugeot Citroen (PEUP.PA) will stop making larger diesel engines with Ford (F.N), the companies said, a week after General Motors (GM.N) took a stake in the French automaker to cement their planned alliance.

Peugeot and Ford will each develop their own engines to replace diesels of 2 liters and above that they make together, the companies said in a joint statement on Thursday. The two automakers jointly develop and manufacture the bulk of their diesel engines under a 12-year-old agreement.

Both automakers said the decision was unrelated to the wide-ranging alliance between Peugeot and Ford's Detroit-based rival.

"This decision has nothing whatsoever to do with GM," a Peugeot spokesman said. "It is not linked to the alliance plan."

The larger engine category accounts for about a quarter of the 3 million diesels that Peugeot produces with Ford each year for both manufacturers' vehicle ranges. Smaller engines making up the remaining majority are unaffected by the decision.

Announcing the planned GM alliance on February 29, Peugeot had vowed to continue and where possible expand its existing partnerships, including the collaboration with Ford and a similar petrol engine deal with BMW (BMWG.DE).

Ford finance chief Lewis Booth said at the time that the U.S. automaker would study the implications of the GM-Peugeot alliance for the diesel partnership.

Discussions on separating large diesel development "were taking place before the GM-Peugeot alliance was announced and were based on differing product needs", a Ford spokesman said, declining to elaborate.

In a March 8 interview with French financial daily Les Echos, Ford Chief Executive Alan Mulally had suggested that joint diesel production with Peugeot would continue in full.

"I don't foresee any change to our agreements, which are beneficial to both parties," Mulally told the French financial daily.

GM acquired a 7 percent stake in Peugeot as part of a 1 billion euro ($1.3 billion) capital increase by Europe's second-biggest automaker that settled on March 29.

($1 = 0.7655 euros)

Reporting by Laurence Frost; Editing by Christian Plumb

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