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MENAFN - AFP - 20/12/2012

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(MENAFN - AFP) French auto group Peugeot Citroen and General Motors laid out a strategy on Thursday to broaden their joint venture in Europe into a global alliance, but have abandoned the idea of joint models for the luxury market.

For both businesses the venture is vital to a recovery from crisis.

The French group, known fully as PSA Peugeot Citroen, has just been rescued with state guarantees for its banking arm and is enacting controversial restructuring.

General Motors of the United States is well on the way to recovery from a state rescue and radical cutbacks when the US car industry fell into distress after the financial crisis.

At the end of February, the two giants announced that they would work together and said that they would come up with firm projects by the end of the year.

The two groups are complementary to the extent that they offer each other technologies, models, markets and distributions networks to achieve global scale and range, but they come from different cultures.

The US administration imposed massive plant and job cuts on GM as a condition for rescue help. The group is now well on the road to recovery.

In France, a programme by PSA to close a plant and axe about 8,000 jobs provoked national controversy and hostility from the newly installed Socialist government which has since had to step in with guarantees of about 7.0 billion euros (9.3 billion) for the group's banking and credit arm.

GM, which owns the Opel and Vauxhall brands in Europe, remains a leading auto group and PSA is the second-biggest auto maker in Europe despite losing huge ground to the German VW empire in the last 10 years. GM has announced that it will close a factory of its struggling Opel subsidiary in Bochum from 2016 when production of the Zafira model ceases.

Under the strategy announced on Thursday, the two boards have accepted three of four projects for the joint development of models.

The first programme is for a so-called monospace vehicle under the Opel/Vauxhall names and a crossover utility vehicle (CUV) under the Peugeot brand. These will replace the Opel Zafira and the Peugeot 3008.

The second programme is for a small monospace vehicle for the two groups, and the third is for a modernised platform for small, low-emission cars for the Opel, Peugeot and Citroen brands and for sale in Europe and on other markets

But the two groups have decided against the joint development of top-range vehicles as had been mentioned at the end of October. The segment for high-end vehicles in which German makers such as VW excel, offer big margins, but the two groups concluded that the business model proposed was not viable.

The two groups said that they were studying other projects for the joint development of vehicles.

They also signed an agreement for joint procurement, restricted to Europe. At the end of February they had laid down a target for joint purchases of 125 billion.

But they said they wanted to broaden their alliance, until now targeted at Europe, to the rest of the world.

This is of critical importance to PSA.

A study by a government-appointed expert after the group announced its job cuts concluded that it had no option but to restructure and that its problems were the result of 20 years of strategic mistakes in missing the bus of globalisation.

PSA is a private group, heavily influenced by the Peugeot family, but in France industrial groups and notably carmakers tend to come under heavy national pressures to focus investment in France and not to "delocalise" investment and jobs.

The other big French auto group, Renault, has diversified heavily in Japan, eastern Europe and also North Africa.

There are two central thrusts to the strategy. One is the joint development of a new generation of small, low-consumption petrol engines evolved from a programme by Peugeot called EB.

The other is focused on projects for vehicles and on industrial projects in Latin America and in other growth markets. A spokesman said that future low-pollution cars could offer opportunities in Latin America.

GM is well established in South America, notably in Brazil where PSA wants to strengthen its presence following an exemple set by Renault.


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