GM forms alliance with Peugeot, will take 7 percent stake in French automaker

General Motors Chairman and CEO Dan Akerson (left) with PSA Peugeot Citroën Chairman of the Managing Board Philippe Varin.

General Motors Chairman and CEO Dan Akerson (left) with PSA Peugeot Citro├źn Chairman of the Managing Board Philippe Varin.  (GM)

General Motors and France's PSA Peugeot Citroen, both struggling in Europe, said Wednesday that they're forming an alliance to share car platforms and purchasing power.

As part of the alliance, Detroit-based GM intends to take a 7 percent stake in the French automaker, making it the second-largest shareholder behind the Peugeot family. Peugeot will raise $1 billion in new capital.

The two companies are seeking efficiencies that will make them more competitive in Europe's car market. GM's European business lost around $700 million there last year and the company has said it's determined to turn it around.

Europe's mass-market car market is brutally competitive. A large number of manufacturers and low prices means carmakers can't make much profit per vehicle and costs need to be kept low.

The two companies said in a joint statement that they'll continue to sell their own vehicles independently and on a competitive basis. The deal will mean they can leverage a combined purchasing volume of $125 billion with suppliers.

"This partnership brings tremendous opportunity for our two companies," said Dan Akerson, GM chairman and CEO. "The alliance synergies in addition to our independent plans, position GM for long-term sustainable profitability in Europe."

Philippe Varin, chairman of the managing board of PSA Peugeot Citroen, said that the partnership was "rich in its development potential."

"With the strong support of our historical shareholder and the arrival of a new and prestigious shareholder, the whole group is mobilized to reap the full benefit of this agreement," he said.

The companies said the alliance would focus on small and midsize cars and that they would share selected platforms and larger parts modules to gain cost savings from larger volumes. The first common platform is expected to launch by 2016.