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Peugeot, GM target $2 billion in annual savings from alliance
PSA Peugeot Citroen has agreed to form an alliance with General Motors targeting $2 billion in annual savings within five years.

"This partnership brings tremendous opportunity for our two companies," GM CEO Dan Akerson said in a statement. "The alliance synergies, in addition to our independent plans, position GM for long-term sustainable profitability in Europe."

GM will take a 7 percent stake in Peugeot as part of a share issue by the French automaker, and the two companies will pool research and development, vehicle platforms and technologies.

GM said it expects to spend $400 million to $470 million for the 7-percent stake in Peugeot, Europe's No. 2 automaker behind Volkswagen AG. The final investment will be determined by market conditions when terms of the rights offering are set.

The agreement was announced after European markets closed.

In the statement, GM said the alliance is structured around two pillars:

• The sharing of vehicle platforms, components and modules.

• The creation of a global purchasing joint venture for the sourcing of commodities, components and other goods and services from suppliers with combined annual purchasing volumes of approximately $125 billion.

"Each company will continue to market and sell its vehicles independently and on a competitive basis," the statement said.

The cost gains from the deal, which will coincide with the joint development of new vehicle platforms, will be limited in the first two years of the deal but will eventually total $2 billion a year, split about equally, the companies said.

GM and Peugeot said the alliance will initially focus on small and midsized vehicles, MPVs and crossovers. The automakers may also develop a new common platform for low emission vehicles, with the first model expected to launch by 2016.

GM officials told analysts today the deal is expected to close and take effect by the second half of 2012.

The deal, which comes as both Peugeot and GM's Opel unit grapple with slow sales and overcapacity in Europe, has met with widespread skepticism among analysts and investors.

"This is not the type of solution we need to see in the European mass market, where capacity has to leave," Credit Suisse analyst Erich Hauser told investors in a note.

"PSA needs GM, but GM doesn't need PSA," said Matthew Stover, an analyst with New York-based Guggenheim Securities. "It's hard for me to figure out how this deal helps GM within Europe."

Both automakers have excess capacity of about 25 percent in the region, Stover said, adding that the alliance risks "introducing complexity at a time when GM is at a very delicate point in its restructuring."

The alliance with Peugeot is the first deal GM has reached with an automaker since its 2009 bankruptcy. Autonews

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