GM Plans to Sell French Transmission Plant Again; Alliance with PSA Gathers Pace As Steering Committee Meets

General Motors (GM) has announced that it is looking for buyers for its Strasbourg (France) transmission facility, reports Reuters. The company said yesterday (9 May) in a statement that, "the company intends to pursue potential buyers that will continue operations with the existing workforce, supply base and customers". It added that it had hired Barclays to manage the sale of the factory.

The move is the second time in four years that GM has decided to sell the unit, having previously decided to buy back the plant for EUR1 (USD1.30) in 2010 as New GM from Old GM following its bankruptcy process and its failure to find a buyer. Under the terms of the buyback, workers agreed to make concessions to cut costs including a two-year wage freeze and reduced annual leave in return for job guarantees.

The plant currently manufactures six-speed automatic transmissions for its own vehicles such as the Cadillac CTS and the Chevrolet Camaro, but also supplies these transmissions to BMW. GM spokesperson Jim Cain said, "There are commitments in place to continue manufacturing the transmissions for the next several years".

GM-PSA Alliance Steering Committee Meets for First Time

In related news, the steering committee of the newly formed alliance between GM and PSA Peugeot-Citroën has met for the first time. The team, made up of five senior executives from each automaker were set to meet in Detroit (United States) yesterday (9 May) according to Reuters. GM said in a statement to the news service: "Work teams are in place, meeting regularly and hopefully soon we will be able to share the first update on alliance progress".

Outlook and Implications

The decision to put the plant up for sale once again comes as the automaker is constructing plans to restructure its European operations which have become a drag on its profitability. While it took the decision to secure the plant in 2010 after starting the sale process in 2008, it may well see this is a good opportunity to sell a non-core asset to a component supplier or an investment fund given the improved global economic situation than when it previously tried. However, much of the restructuring process to be undertaken by the company will be focused on its core vehicle manufacturing operations under the Opel and Vauxhall brands. While a decision has yet to be made on one form this will take, there has already been some suggestion that it could result in the closure of two facilities. While some plants have already had new vehicles earmarked for them, there are others that will have to create and offer up business cases for their survival against others. Recent efforts by its Ellesmere Port (United Kingdom) plant are thought have gone some way to ensure its survival having been in the firing line in the past (see Germany – United Kingdom: 9 May 2012: GM Planning to Save Ellesmere Port Plant and Close Rüsselsheim, Suggests Union Leader). However, we will have to wait for a final decision to be made by those senior executives working on the plan.

However, the restructuring plan and the decision to sell the transmission site will have had little influence from the new alliance with PSA. Indeed, GM's spokesperson told Reuters that the sale was "definitely not" linked to its relationship with French automaker. On the other side of this relationship, PSA also has its own issues to address outside the alliance, related to both overcapacity and other cost savings in the face of the contracting European market. While the automakers are moving forward with their plans joint sourcing initiative which should be in place to some degree before the end of the year, any other benefits are likely to come in around 2016, when the first jointly developed vehicles come on stream. This was underlined by GM chief financial officer (CFO) Dan Ammann, who has previously said not to expect any meaningful financial benefit in the near term from the alliance and that "the real payoff will come further out in line with the launch of some of those product programs". However, there is already talk that this could be widened from B- and D-segment vehicles, as well as a shared-platform eco-friendly car. PSA's director of brands Frederic Saint-Geours has said that other vehicles could include a crossover, a compact multi-purpose vehicle (MPV) and a C-segment car. It will now be down to these early meeting between the steering committee and discussions between opposite numbers at each automakers with regards to these programmes to see how many of these will eventually come to fruition.