General Motors and Peugeot Announce Deal to Save $2 Billion Annually

General Motors

and French car maker PSA Peugeot Citroen have announced a deal that the two companies say will lead to about $2 billion in annual savings split nearly equally between the two. General Motors and Peugeot said that they will combine their efforts in research and development, vehicle platforms and technologies. The two companies will focus their efforts on small and midsize cars and crossover cars. The vehicles that General Motors and Peugeot plan to develop will share platforms and their combined purchasing power will further reduce costs for the two companies. The first cars from the companies' joint effort should go on sale by 2016. As part of the deal, General Motors will purchase a 7 percent stake in Peugeot and the two companies will continue to market their vehicles separately. General Motors and Peugeot have both been losing money in the ultra competitive European car market. With so many car manufacturers based in Europe, price competition is fierce and many automakers struggle to earn a profit. The market has reacted coolly to the announced deal, with many observers wondering how much two money losing automobile operations could actually benefit each other. General Motors stock was down 0.54% at $26.00 at the time this article was written and Peugeot remained one of the most heavily shorted stocks on the French stock exchange.