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PSA, Opel Drop C-D Car Project, Add Small Gasoline Collaboration

Executive Summary

Although joint production of Opel’s Insignia replacement and the Citroen C5 at Rennes would help both companies economically, it would create political problems for Opel and its unions.

PARIS – General Motors and PSA Peugeot Citroen sign official marriage papers for three of their four car projects and a joint purchasing organization in Europe.

Although they dropped a C-D car platform project, they added a program to develop next-generation small gasoline engines together, and they say they are looking at industrial and product cooperation in South America.

Since the alliance between the two companies was announced in February, they have completed the paperwork on four industrial projects:

  • A C-segment multipurpose van for Opel and a compact cross/utility vehicle based on the next Opel Zafira that will replace the Peugeot 3008.
  • Small multipurpose vehicles for Opel and Citroen, to replace the Citroen C3 Picasso and Opel Meriva.
  • A new, fuel-efficient B-segment that could underpin successors to the Opel Corsa, Citroen C3 and Peugeot 208.
  • Three-cylinder, turbocharged gasoline engines based on PSA’s new EB engine family.

The first vehicles will appear in 2016, the auto makers say.

While there remains no official talk of sharing production, it clearly is a subject of discussion between the two companies, as overcapacity is a problem for both despite several plant closures already announced.

For example, GM is unlikely to invest in engine tooling when PSA’s plant in eastern France easily can supply both companies, and at lower cost for both thanks to greater scale. The Zafira now is made in Opel’s Bochum, Germany, facility, which will close in 2016, meaning Opel needs to find a plant for its Zafira replacement.

The partners have not been able to make a business case for common development of a C/D segment sedan, PSA spokesman Jean-Baptiste Mounier says. He says PSA will go ahead with the project on its own. The Citroen C5 has been promised for the factory in Rennes, France, which is among the auto maker’s underused assembly plants.

Although joint production of Opel’s Insignia replacement and the C5 at Rennes would help both companies economically, it would create political problems for Opel and its unions. However, Mounier says the problem with the C/D program was more technical than political.

While Latin America is not yet at the project stage, it is likely to become concrete.

Opel needs new markets outside Europe. It has announced plans to sell vehicles in Israel, Chile, Australia and Russia, and says it is preparing to enter more export markets, including South America.

PSA has two assembly plants and engine and component production in South America, and this year it added capacity. Joint output of cars in Brazil or Argentina would not cause the same political problems as in Europe, where no country wants to see jobs lost.

At its 11-year-old factory in Porto Real, Brazil, PSA makes the Peugeot 207 family and Hoggar pickup, plus the Citroen C3 family. It also produces 1.4L and 1.6L gasoline and flex-fuel engines. Output in 2011 totaled 138,370 cars and 219,000 engines.

At Cordoba, Argentina, in a 49-year-old plant, PSA builds the Peugeot Partner and Citroen Berlingo delivery vans, as well as the Peugeot 307, 408 and Citroen C4.

In 2011, the group made 141,600 vehicles there. It also produces engines and chassis parts at a plant in Buenos Aires. In the first half this year, PSA had a 5.1% share of the Latin American market.

Joint purchasing will start with an organization for Europe, although in their February contract the auto makers planned global cooperation

“Europe is where the problem is,” Mounier says.

The organization technically will be a 50-50 joint venture, he says, although it will use the buyers and expertise already developed by each company. Its task is to purchase parts for the products being jointly developed in Europe.

The venture was expected to be in operation by the end of the year, but PSA says it still is awaiting approval by some antitrust authorities.

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