Friday, January 25, 2013

Auto Alliance Cost Svaings

Economies of scope in products are often the result of economies of scale in producing a common  component. Case in point is the alliance between GM and PSA Peugeot Citeroen. They will be collaborating on a number of models. Some models marketed by both will based on a platform developed by one.
The two firms will also collaborate on further improvements to PSA Peugeot Citroen's EB three-cylinder petrol engine used in the 208, and have signed a definitive deal for joint purchasing that should bring better economies of scale for PSA and GM brands.

1 comment:

  1. The alliance of GM and Peugeot was estimated to result in savings of $2 billion from sharing procurement costs of steel and other materials, and was also on track to create other new synergies from joint development and manufacturing of some vehicles in Europe. The deal would allow both companies to apply their combined global leverage in particular with suppliers of steel. Both auto makers would produce cars built from the same basic platform then sell the vehicles under their own respective brand names. However, soon after the alliance was formed European market demand had shrunk considerably and GM has since then scaled down its stake in Peugeot.

    “The Peugeot-GM alliance ran into trouble shortly after it was announced because of losses at the French auto maker amid a sharp downdraft in European auto sales. Peugeot later sought additional cash from GM, but the U.S. auto maker rebuffed the request, and the companies scaled back their joint development efforts to two vehicles from three.”

    Source: Pearson, D., & Bennett, J. (2013, Mar 07). Corporate news: Peugeot's CEO says GM alliance is on track. Wall Street Journal

    Source: Pearson, D., & Bennett, J. (2013, Dec 13). Corporate news: GM cedes Peugeot to china --- French auto maker is in discussions to partner with Dongfeng motor. Wall Street Journal