* Projects miss initial hopes but show progress-analyst
* Plans for mid-sized cars dropped, engines added
* Peugeot aims to sign refinancing deal next month
By Laurence Frost and Gilles Guillaume
PARIS, Dec 20 General Motors and PSA
Peugeot Citroen, daunted by likely political
roadblocks, scrapped plans for a joint mid-size car programme
within their nascent alliance while adding engine cooperation.
The automakers said on Thursday they had signed firm
agreements on three out of four previously announced vehicle
projects to combine their future small car programmes as well as
two sizes of roomier minivans and crossovers.
Plans to pool replacements for larger models such as the
Citroen C5 and GM's Opel Insignia were dropped after the
companies failed to reach a "convincing business case", a
Peugeot spokesman said.
But with binding agreements on three other vehicle programs
and new plans to share a future generation of small gasoline
engines, "the alliance is taking form and moving up a gear," he
Since its announcement in February, the planned alliance has
drawn investor scepticism as the French automaker's finances
worsen, prompting thousands of domestic job cuts under close
supervision by Socialist President Francois Hollande's
Sharing larger car production would also have raised
politically fraught questions about whether to scrap assembly of
the C5 in Rennes, western France, or the Opel flagship model in
"The subject was clearly too conflictual between France and
Germany," Societe Generale analyst Philippe Barrier said.
"The projects announced today are a long way from the
mega-global alliance they were aiming for originally," he said.
"But there's progress - and the addition of engines shows that
Peugeot can be useful to GM."
The three-cylinder engines, designed to comply with Euro VII
emissions standards coming into force around 2019, will bring
big savings for both partners, Peugeot said without elaborating.
Detroit-based GM took a 7 percent Peugeot stake in a capital
increase earlier this year as Europe's second-biggest automaker
burned through about 200 million euros ($265 million) a month.
GM is also struggling to stem losses in the depressed and highly
competitive European market.
Peugeot, which is closing a plant near Paris and shedding
more than 10,000 domestic jobs, will next year reduce monthly
cash consumption by 100 million euros excluding restructuring
costs, Chief Executive Philippe Varin pledged in an interview
with Le Monde on Thursday.
Talks on a deeper tie-up with GM were halted last month as
Peugeot's situation deteriorated, sources with knowledge of the
matter have said.
The partners had faced a year-end deadline to reach firm
agreements on proposed joint programmes or scrap them to pursue
their own projects.
Besides small cars to replace current Opel Corsa and Peugeot
208 models, the carmakers will share development of a subcompact
minivan, as well as a new vehicle platform in the compact
category, Peugeot said on Thursday.
The new architecture will spawn an Opel people-mover likely
to replace its current Zafira and a Peugeot crossover - between
a car and an SUV.
GM and Peugeot are due to give a January update on their
cooperation plans as well as the $2 billion in estimated annual
savings they touted when the alliance was first unveiled.
Since then, the partners have put aside plans to develop a
small car for Latin America, a dual-clutch gearbox and now the
tentative mid-sized car programme.
The door remains open to cooperation outside Europe, GM and
Peugeot said, promising "exploration of product and industrial
initiatives in Latin America or other growth markets".
Peugeot has reached an agreement in principle with creditor
banks to refinance its Banque PSA lending arm and expects to
finalise the deal next month, the company also said.
In return for the state-backed 11.5 billion euro debt rescue
and guarantees on 7 billion euros of further borrowing, the
carmaker appointed French industrialist Louis Gallois to its
board as a government representative.
But the bailout and increased ministerial pressure on
Peugeot have raised some doubts at GM about deeper cooperation.
Following the government intervention, "our partner
naturally asked itself some questions", Varin said in his
interview with Le Monde. "I spent a certain amount of time
explaining the situation to them."