Peugeot and GM in alliance talks: sources

Wed Feb 22, 2012 11:40am EST
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By Christiaan Hetzner and Laurence Frost

FRANKFURT/PARIS (Reuters) - General Motors (GM.N: Quote) and PSA Peugeot Citroen (PEUP.PA: Quote) are discussing a manufacturing alliance designed to stem losses in Europe and reduce production costs elsewhere, sources with knowledge of the matter said.

Talks between GM, the world's biggest automaker, and European No.2 Peugeot are focused on sharing vehicles and parts rather than swapping stakes, according to the people. Any new shareholdings that emerged would be small and symbolic.

French Labor Minister Xavier Bertrand confirmed that the government had been informed about a possible "strategic partnership," online newspaper La Tribune reported that the discussions had been taking place for months, and the news sent the French automaker's shares soaring on Wednesday.

Peugeot confirmed talks but would not name the partner, and GM spokeswoman Kelly Cusinato said "We routinely talk to others in the industry but have no comment beyond that."

Peugeot shares jumped as much as 3 euros, or 21 percent, and were 13 percent higher at 1524 GMT, the biggest one-day gain in three years, while GM was down 0.1 percent.

As of Tuesday's close, Peugeot had declined 50 percent over the past 12 months - the worst performance on the 15-member Stoxx Europe autos and parts index .

"This alliance would be a game changer for Peugeot in the medium term," Natixis analysts said in a note to clients, raising their rating on the stock to "buy" from "neutral."

While potential synergies have already been identified, Peugeot is treading cautiously to avoid building expectations after the 2010 failure of tie-up talks with Mitsubishi Motors (7211.T: Quote) in 2010.   Continued...

The car logos of (top to bottom) Peugeot, Vauxhall and Opel are seen in this February 22, 2012 combination of file photographs. Peugeot is in talks with General Motors over collaboration with the U.S. car maker's ailing European operations Opel and Vauxhall that could cut costs for all three in a car market that is again under pressure from a stagnant economy. REUTERS/Denis Balibouse/Stringer/Ina Fassbender/Files (TRANSPORT BUSINESS)