Exclusive: Peugeot family ready to step aside for GM - sources

Thu Jun 27, 2013 5:31pm EDT
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By Sophie Sassard, Laurence Frost and Gilles Guillaume

LONDON/PARIS (Reuters) - PSA Peugeot Citroen's (PEUP.PA: Quote) founding family has offered to give up control of the French automaker as it tries to revive plans for a closer tie-up with General Motors Co (GM.N: Quote) backed by a fresh capital injection, sources said.

Any deal combining Peugeot with GM's European Opel division would face major political hurdles because it would bring more factory closures and job losses in France and Germany, people with knowledge of the discussions told Reuters.

The Peugeot clan, one of Europe's three surviving car dynasties, and beleaguered chief executive Philippe Varin turned to 7 percent shareholder GM after inconclusively sounding out other potential investors including Chinese partner Dongfeng, the sources said.

"GM faces the same overcapacity situation with Opel, and that's why PSA is trying to convince them to merge the two," said one of the people, who asked not to be identified because the talks are confidential. "The Peugeot family has now accepted that they'll lose control, so this is no longer an issue."

The family, which founded Peugeot in 1810 as a coffee mill manufacturer, holds a 25.4 percent stake commanding 38.1 percent of voting rights in a company now struggling for survival.

Peugeot and GM both declined to answer questions about their frequent discussions. "We don't comment on speculation or rumors," Peugeot spokesman Jonathan Goodman said.

Before injecting more cash, GM would need assurances that it had a free hand to cut production capacity as it took control of integrating Peugeot and Opel, sources said in recent days.

SALES SLUMP   Continued...

Philippe Varin (C), Chief Executive Officer of French carmaker PSA Peugeot Citroen, arrives with members of the China Entrepreneur Club and guests in the courtyard of the Elysee Palace to listen to a speech given by French President Francois Hollande in Paris June 25, 2013. REUTERS/Philippe Wojazer