Wednesday, February 29, 2012

GM Alliance with Peugeot? Risky Business

News reports indicate that GM is considering an alliance with (and investment in) French automaker Peugeot. I'm skeptical of this strategic move.

The French automaker is struggling, as is GM Europe. It is rare that two weak companies join together and become formidable. Beyond that, here are three other reasons to question this deal:

1. GM has a poor track record of international alliances, joint ventures, and acquisitions.

2. GM execs may find this move distracting, when it should be focused on strengthening its position in the US and China, where profit potential is greater.

3. Why does GM need cooperation with Peugeot to build cars? Shouldn't GM have already moved toward global platforms that are only slightly adapted for local markets? Shouldn't GM Europe cooperate with GM China instead? Shouldn't it maintain a rationalized product line rather than proliferating similar models around the globe? It is possible to take localization too far, and GM has done so in the past, losing valuable scale economies.

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