GM alliance helps Peugeot raise $1.33 billion in capital, sells Paris headquarters office for $326.5 million

Troubled French car maker, PSA Peugeot Citroen announced earlier today that they have successfully raised €1 billion ($1.33 billion) in capital after their alliance with US car maker, GM strengthened. GM finally managed to form an alliance with a European car manufacturer after a gap of 7 years. GM had earlier formed an alliance with Italian car maker Fiat which later dissolved in 2005.

GM has invested $405 million and bought a 7% stake in Peugeot, which is also the second largest car manufacturer in Europe. This investment also makes GM the second largest share holder in the French car company after the Peugeot family which owns 25.2% stake.

Peugeot had stated earlier that they had lost $2.13 billion in cash last year. This year, Peugeot plans on selling assets worth $2 billion in order to negate losses. As a part of the plan, Peugeot has sold their 326,000 square feet headquarters office in Paris to Ivanhoe Cambridge, a Montreal based Property Management and Development Company for 326.5 million. Peugeot occupied the sprawling building back in 2003, but thanks to rise in debts, they were forced to sell the property.

Speaking about the buy, Mr Bill Tresham, President, Ivaanhoe, said, “We are pursuing our strategic plan to acquire high-quality buildings in the best markets. Investment opportunities such as this are quite rare these days.”

Peugeot and GM plan on saving $2 billion years annually over the next five years, while launch of new vehicles are expected to start from 2016. Peugeot is also facing heat from their workers in various manufacturing units over fears of job cuts and shut down. As of now, Peugeot has not stated anything about job cuts, but experts suggest an announcement will soon be made after the elections.

Will this alliance work in favor of the French car maker, or will suffer a fate similar to Volkswagen – Suzuki, remains to be seen. According to Arndt Ellinghorst, Head, Automotive Research, Credit Suisse Europe, “The European auto industry is running out of options. This is obviously worth the effort, but whether it’s going to be successful, who knows?”