General Motors Buys 7% of PSA Peugeot Citroën to Create Alliance

General Motor and PSA Peugeot Citroën will begin a long-term, strategic alliance that is meant to strengthen European competitiveness. GM will purchase 7% of PSA making it the company's second largest shareholder. The synergies between the companies will reach $2 billion (roughly €1.5 Billion at current exchange rates) within five years.  

The tie-up is based on two pillars: sharing current vehicle parts and components; and a purchasing joint venture for components, goods and services from suppliers. This deal effects only their joint purchasing, and they will remain separate and competitive. 

In the future, GM and PSA will share vehicle platforms and other parts worldwide. They will work together to develop a common, low emissions platform that could launch by 2016. Regardless, both companies will continue to be independent and compete against each other. However, in terms of purchasing power, they will act as one entity that should cut parts costs for both manufacturers. 

GM will begin using Gefco, a PSA subsidiary, for logistics in Europe and Russia. 

From the wording of the release, it seems that GM and PSA will focus on sharing platforms in Europe first. Whether this will begin to affect GM in North America and South America as well, is still too soon to tell.