GM and Peugeot Merger With the Current

GM and Peugeot Merger

With the current economic trends that many multinationals are caught up in especially after the global recession, many opt for alternative ways to survive in the market as well as alternative markets. This drive to venture into other markets has seen many of the multinationals and big businesses venture into alliances and mergers that would see them have a footing in varied economic settings hence supporting their entire business framework.

The article is mainly based on the alliance that the General Motors intend to forge with the French auto maker Peugeot Citroen. The General Motors (GM ) intends to take buy 7% of the Peugeot Citroen in a move that is widely seen to be a step towards salvaging the Peugeot from total collapse and also to solidify the footing of GM within the European market.

The alliance between the two companies is based on a long-term strategic alliance principle that is broad in its basis and global in the focus. This is in the light of the consolidation of their strengths from both sides and the capabilities and using it to expand the influence over the European market as a unit. This consolidation will be achieved through the joint procurement at a global scale as well as sharing of the components, modules and the vehicle platforms.

The other strategic decision that Peugeot made was to raise $1.3 billion in order to be ready for the alliance with GM. This will be done through a share sale. The Peugeot family group will also invest in the shares. The Peugeot family will consequently have a 150 million Euros worth of the new shares that will be floated as part of their strategic engagement.

There are various benefits that are forecasted from this alliance between the GM and Peugeot. The first is the aspect of cost saving that they estimate will run to the range of $2 billion on an annual basis with a commencement date projected at five years from the alliance date. These saved costs are expected to be shared on an equal basis between the two companies (Mediacorp Interactive media, 2012).

The alliance is also looked at as a means of increasing the employment opportunities for France in general. The partnership is widely viewed as being favorable and beneficial to the PSA's presence in France and employment. This alliance will go a long way in averting the magnitude of the lay-offs due to the economic slow in Europe in general.

The Peugeot Company will also benefit from this alliance as it will be a chance to venture into partnership. Peugeot is traditionally known to favor technology cooperation over the actual partnership and this has always limited their capacity and potential. With this alliance, in as much as the Peugeot will conserve the identity, it will also have a chance to have a wider coverage and spectrum in terms of products.

The immediate benefits of the alliance in terms of the products can be seen from the fact that they have already struck an agreement to build petrol engines through the German-based BMW company, their light trucks to be built by Fiat and Tofas and the diesel engines to be sourced from the U.S.A. based Ford motors. This will be an addition to the working collaboration that already exists between PSA and Mitsubishi of Japan for the SUVs and the electric cars, Toyota in building small cars and with Renault in building mechanical parts.

There are however various critics who feel that the merger or alliances between big companies especially in the motor industry fail to work. They attribute this to the problems that come up after the merger as the cultures of the two companies are meant to merge and the lack of consolidated modes of conducting business, in that the people from company A could be doing things differently from company B. And none of them would like to compromise their formalities hence a gap between the operations of the alliance formed (Kevin Voigt, 2009).