The Peugeot family might hold the key to M&A among European automakers. Descendants of the French manufacturer's founders are willing to give up control in exchange for closer ties with General Motors, according to a Reuters exclusive. The family's recognition that its time is up might spur broad industry consolidation across the continent.
That is sorely needed among mass-market players. Too many manufacturers are chasing too few orders in a market that's still shrinking. According to research by Credit Suisse last year, half of vehicles in Europe are produced at a loss. Another 10 per cent only break even.
This year, inventory levels rose more in the first quarter than the average for the same period between 2008 and 2012, according to Credit Suisse. With sales falling, that suggests factory floors may have to stand idle in the second half of the year. In the hope of easing its problems, Peugeot last March struck a deal with GM to share the costs of building new cars. As part of the deal the Detroit automaker bought a seven per cent stake in its partner and the Peugeot family reduced its supervoting stake from just over 50 per cent to 38 per cent. It holds a quarter of the total outstanding equity.
Familial preference is not the only thing that has stopped much needed consolidation. The French company is burning cash at a pretty alarming rate - it will go though at least ^1.5 billion this year, after it set fire to ^3 billion in 2012. Meanwhile the French government wants it to keep all its plants open - and presumably shed no jobs, which limits the ability to cut costs on its own or in a merger. As for GM, it is already restructuring its Opel unit and could lack the stomach for another hard restructuring.
That said, Fiat Chief Executive Sergio Marchionne, for one, remains a fan of consolidation. The Peugeot family's willingness to surrender control is key. It is a milestone that could underwrite Peugeot's very survival. And it's a sign that the continent's automakers may finally accept that they must do more than wait for the car market to improve.
That is sorely needed among mass-market players. Too many manufacturers are chasing too few orders in a market that's still shrinking. According to research by Credit Suisse last year, half of vehicles in Europe are produced at a loss. Another 10 per cent only break even.
This year, inventory levels rose more in the first quarter than the average for the same period between 2008 and 2012, according to Credit Suisse. With sales falling, that suggests factory floors may have to stand idle in the second half of the year. In the hope of easing its problems, Peugeot last March struck a deal with GM to share the costs of building new cars. As part of the deal the Detroit automaker bought a seven per cent stake in its partner and the Peugeot family reduced its supervoting stake from just over 50 per cent to 38 per cent. It holds a quarter of the total outstanding equity.
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That said, Fiat Chief Executive Sergio Marchionne, for one, remains a fan of consolidation. The Peugeot family's willingness to surrender control is key. It is a milestone that could underwrite Peugeot's very survival. And it's a sign that the continent's automakers may finally accept that they must do more than wait for the car market to improve.