Recent reports that the Peugeot family is willing to hand over its struggling automotive business to General Motors or China's Dongfeng Motor may have an ulterior motive.
The thinking goes like this: Peugeot family sources have been briefing the media about a possible GM or Chinese takeover of PSA Peugeot Citroen to frighten the French government and the French public into accepting the cuts in jobs and production capacity that are needed to stop the automaker's huge cash burn.
The reports may be a stalking-horse to show that unless some sacrifice is made by the employees, GM could come in and remove PSA's manufacturing presence in France, Barclays said in a note to investors.
A GM deal to acquire PSA at a bargain price similar to Fiat's acquisition of Chrysler is unlikely because merging the Peugeot and Citroen brands with GM's Opel/Vauxhall division would mean unpalatable job cuts in France and in Germany, where national elections take place in September, industry watchers say.
GM, which paid 320 million euros (about $423 million) for a 7 percent stake in PSA, likely sees the alliance as a mistake, and a further cash infusion could be viewed as "throwing good money after bad," Barclays says.
Morgan Stanley, however, sees merit in combining the money-losing European automotive divisions of GM and PSA into a spun-off joint venture. Such a move could provide the trigger for the type of capacity exit that saved the U.S. auto industry in 2009, it says.
Morgan Stanley expects PSA to burn 1.4 billion to 1.5 billion euros (about $1.82 billion to $1.96 billion at the current exchange rate) in 2013. The automaker likely will need a cash investment for a new turnaround plan; and with few assets left to sell, the company needs a partner.
"A closer tie-up between GM and PSA is a viable idea," Morgan Stanley said in a June 27 note to investors.
Reuters quoted unnamed officials as saying the most likely rescue for PSA will come from the French government or a state-owned investment vehicle taking a stake in PSA.