GM 'scraps Opel - Peugeot Citroen merger'

General Motors has scrapped plans to merge its troubled German unit Opel with PSA Peugeot Citroen because of the French carmaker's financial woes, a news report said Wednesday.

• Opel cuts thousands of jobs across Germany - Business & Money (1 Nov 12)
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• General Motors vows no plant closures at Opel - Business & Money (3 Aug 12)

"GM gave up in early November on the merger plan between Opel and PSA Peugeot Citroen's auto division," French financial newspaper La Tribune said on its website, citing "a well-informed French source."

The source told the paper the prospective deal was "suspended, to say the least, and in all likelihood buried."

Instead of a merger, the carmakers will pursue a more limited partnership in four specific areas, which they had already announced on October 24, La Tribune said.

The companies had already announced in February that GM was taking a seven percent stake in PSA Peugeot Citroen as part of a "strategic alliance."

Neither company had confirmed or denied plans for a full merger.

GM said Wednesday that plans for the alliance were still going forward.

"The alliance between GM and PSA is progressing as planned. We are fully focused on earning the benefits from the alliance that we have identified," said GM spokesman Greg Martin.

"Focus areas are logistics, where we already signed an agreement in summer, purchasing and product development. Beyond that, we have no further comment."

A PSA Peugeot Citroen spokesman said: "It's one rumour after another. We will not make any more comments. On October 24, we announced four projects with GM. Today, we are concentrating on carrying out those projects."

The proposed merger, the subject of much speculation in the French, German and US financial press, was aimed at combining the two carmakers' supply chains and enabling them to jointly produce components such as chassis.

With the European car market in the doldrums due the eurozone debt crisis, manufacturers are faced with heavy losses and overcapacity.

Peugeot, where sales fell by 3.9 percent in the third quarter to €12.9 billion euros, announced in July that it intends to cut 8,000 jobs.

GM profits dropped 12 percent in the third quarter to $1.5 billion, hit by losses in Europe, where it has announced plans to cut 2,600 jobs by year's end.

The company lost half a billion dollars in Europe alone in the third quarter, when it produced just 196,000 cars - down from 270,000 in the same quarter last year.

AFP/jcw