GM Denies Peugeot Takeover Bid Photo:

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Tony O'Kane | Jul, 01 2013 | 6 Comments

General Motors has poured water on rumours that it is preparing to acquire a controlling stake of PSA Peugeot-Citroen.

According to a Reuters report last week GM was poised to take a controlling share of PSA, but GM has since refuted that claim.

GM acquired seven percent of PSA in a 1 billion Euro share deal early last year, but control of the group remains with the Peugeot family.

The family currently holds 25.4 percent of shares in PSA Peugeot-Citroen as well as 38.1 percent of voting rights, however sources close to the family say the Peugeot clan are prepared to lose control of their company - for the right price.

The French auto group is struggling to stay afloat as it deals with excessive over-capacity at its manufacturing plants and a sharp decline in demand for its cars.

The GM deal was meant to result in cost-saving platform and production sharing between Peugeot, Citroen, Opel and Vauxhall, but the fruit of this union won't reach the market until 2016 at the earliest.

Opel's production facilities are currently operating at just 66 percent of maximum capacity, while PSA isn't much better at 71 percent. Mass layoffs appear inevitable; if GM were to exercise full control of PSA then it's likely that production for all three brands would be consolidated in fewer plants in order to save costs.

But this would be a politically unpalatable move, and one that would likely favour Opel given its status as a wholly-owned subsidiary of GM. With roughly 77,000 assembly line workers currently employed in France by PSA, there's a lot at stake.

But for now, GM appears uninterested in bailing PSA Peugeot-Citroen out. Other suitors aren't forthcoming either, and a proposed acquisition by Chinese automaker Dongfeng has also failed to deliver a result for PSA.

If a solution doesn't present itself soon, Peugeot and Citroen could go the way of Saab; analysts estimate that if current trends continue, PSA will run out of money before the end of 2013.

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