General Motors and French automaker PSA Peugeot Citroën agreed Wednesday to form a "long-term and broad-scale" alliance to share vehicle platforms and jointly purchase parts and materials.
The deal will pair the world's largest automaker, GM, with the 8th-largest automaker. Peugeot is also Europe's second-largest automaker behind Volkswagen AG.
GM and Peugeot, which are already overhauling their struggling European operations, including GM's German Opel unit, expect the partnership to generate limited benefits in the first two years. But yearly savings of about $1 billion are targeted for each company within five years.
GM will invest $400 million to $470 million for a 7-percent stake in Peugeot, becoming its second-largest shareholder after the Peugeot family.
The companies plan to work initially on small and midsize cars, crossovers and multipurpose vehicles. They may also develop a new platform for low-emission vehicles, with the first models expected to go on sale by 2016, they said.
Here's a look at analyst reaction to the deal:
"Peugeot's struggling; Opel's struggling. You can't just put two struggling entities together and expect magic."
-- Mirko Mikelic, an advisor with Fifth Third Asset Management
"PSA needs GM, but GM doesn't need PSA. It's hard for me to figure out how this deal helps GM within Europe. [The plan risks] introducing complexity at a time when GM is at a very delicate point in its restructuring."
-- Matthew Stover, an analyst with New York-based Guggenheim Securities
"Notably, we expect each company will still need to address one of the most difficult and potentially costly challenges -- excess capacity --individually rather than via the alliance, at least initially. Alliances and joint ventures are common in the global auto sector, although their track record … has been mixed at best. Still, if this arrangement, along with actions by other European automakers, manages to overcome political resistance to possible reductions in capacity in Europe, the industry's profitability could ultimately benefit."
-- Standard & Poor's
"How does a complex assortment of collaborations between two rivals that, assuming they can overcome cultural and organizational biases in both companies that will prevent them from working together, and take years to see any benefit to either company, solve Opel's problems in the short term? Opel has decent models in the pipeline and a financially stable parent, but none of this solves the fundamental issue of excess capacity and sky-high German labor costs."
-- Analyst and consultant Maryann Keller of Stamford, Conn.
"There would be a better response from shareholders if both companies admitted that they both need to cut costs and trim down."
-- Manoj Ladwa, a senior trader at ETX Capital in London
"We respectfully see many reasons to be skeptical about the magnitude of today’s news. GM is already the biggest automaker in the world -- scale isn’t the company’s challenge. Both GM and PSA very directly said there would be no plans to share capacity; as a result, this is unlikely to be a near-term fix for GM’s issues in Europe. The cost savings will take several years to occur. GM is sharing 50% of the cost savings, despite the fact that it is more than twice the size of PSA; in fact, this was GM’s biggest pushback on the Renault-Nissan proposed alliance last cycle. GM is also cutting a check to get involved, while PSA is not. Arguably, this increases complexity at GM -- while the stated goal has been to decrease it. And these joint ventures have not worked out well for GM in the past."
-- Peter Nesvold, an analyst with Jefferies & Co.
Bloomberg and Reuters contributed to this report