Why a tie-up isn’t necessarily the answer
IN 1974, Citroën brought out its CX marque, an avant-garde masterpiece that rivalled the likes of Audi, BMW and Mercedes Benz. It was the last great Citroën. Two years later, Peugeot took over the financially-struggling car company in a deal brokered by the French government. It spent the next decade or so destroying everything that made Citroëns special. The same thing happened when General Motors bought Saab in 1989. Both cases serve as cautionary tales to those who think mergers or pacts can solve the industry’s woes.
Any cooperation between Peugeot and GM’s European operations – Vauxhall and Opel – is likely to stop short of a merger; the Peugeot family will not want to lose control of the firm that has been part of their dynasty since 1842. Instead the pair are likely to take small, symbolic stakes in one another and to share technology and production facilities, much like Nissan, Renault and Damiler did when they announced a three-way tie-up in 2010.
Heaven knows the pair need to do something. Last year they lost around $1.2bn between them, as the European car market struggles in the face of the euro crisis and the withdrawal of government-funded scrappage schemes (thankfully Britain’s Asian-focused car production is bucking the trend). But a tie-up in and of itself is not a solution. The real problem is that Europe’s car industry is operating at huge overcapacity. Whereas the US car sector shed almost half a million jobs in the two years before its biggest names emerged from bankruptcy in 2009, just two European factories have closed since 2007.
What Peugeot, Vauxhall and Opel must do is shut down some of their plants. A tie-up won’t make it any easier.