By Dow Jones Business News, October 01, 2013, 01:07:00 PM EDT
By Sam Schechner
PARIS--General Motors Co. ( GM ) and PSA Peugeot-Citroen (UG.FR) will jointly produce new vehicles at a GM plant in
Spain, one of the first concrete examples of progress in a broader alliance aimed at curbing the car firms' European
Peugeot said late Tuesday that the two companies will begin producing B-segment cars--like the new version of
Peugeot's C3 Picasso--at GM's plant in Zaragoza, Spain, for arrival on the market by late 2016.
GM's Opel division will be responsible for engineering the new vehicles, while Peugeot will supply the power trains
for the new cars, which will be sold under the brands of both companies, Peugeot said.
Tuesday's announcement represents some of the biggest progress for the two companies' wide-ranging alliance that was
announced 18 months ago but has so far only released a joint purchasing agreement. The joint vehicle project is one of
three the companies said they would explore last December.
Both Peugeot and GM's Opel are struggling under shrinking sales and factories that are running at far less than full
capacity, generating heavy losses. Peugeot lost 426 million euros ($575.4 million) in the first half of 2012, largely on
weakness in Europe. GM lost $110 million in Europe in the second quarter.
The companies are hoping to use their alliance to pool development costs for new vehicles, like the ones that will be
built in Spain, as well as to better use their struggling factories. Peugeot, which is burning cash, has also sold
assets and has been considering whether to deepen its alliance with Chinese partner Dongfeng Motor Corp. to speed up
overseas development, according to people familiar with the matter.
Peugeot and GM are also in discussion to jointly produce another type of vehicle at a Peugeot factory in eastern
France--also one of the joint projects first agreed in December, according to people familiar with the matter. But those
discussions aren't yet near their conclusion, and it isn't clear they will come to fruition, those people added.
Producing Peugeot cars in a GM plant is a new psychological step--albeit one long expected--for the French automobile
company. Peugeot is in the midst of negotiating a new labor pact with French unions in the hope of returning them to
profitability, but the impact of the move may be less pronounced because the company already produces the C3 Picasso in
its factory in Slovakia, not France.
Write to Sam Schechner at email@example.com
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