Friday, June 28, 2013

A Potential Car Company Match Made In Hell

Just barely out of bankruptcy itself, thanks to an extraordinary government bailout and rule changing on its behalf, GM is now being asked to save.....the French?

The Detroit News: Peugeot rescue too risky for GM

After 203 years in control, the Peugeot family appears to be angling for General Motors Co. to come to the rescue of its ailing French automaker, PSA Peugeot Citroën.

Descendants of Jean-Pierre and Jean-Frédéric Peugeot, who founded the industrial concern in 1810 as a steel foundry, are prepared to cede control of their money-losing automaker in exchange for another cash infusion from GM, Reuters reported Thursday, citing “sources.” PSA also pursued talks with its Chinese partner, Dongfeng Motor Corp., but is renewing an interest in a bailout from Detroit.

GM shouldn’t, unless the new brass atop the Renaissance Center is eager to repeat the mistakes of its predecessors. You’ll recall that GM alums Jack Smith and Rick Wagoner, among others, were the brains behind a web of global alliances connecting GM to second-tier players Isuzu, Suzuki and Subaru of Japan, culminating in the Fiat SpA folly that cost $2 billion in cash to exit.

It’s all gone now, unwound in a desperate attempt over much of the past decade to rationalize the company, better manage resources and focus limited executive attention on core GM business at home and abroad before bankruptcy forced an even starker restructuring. With $15 billion in losses over the past dozen years in Europe, can GM profit by doubling down on Europe’s sickest volume automaker?

Remember, GM just might do it as an opportunity to lose even more money, which appeals to GM's fabled culture: GM loses money on every car, but they make it up in volume.

GM already has a $1 Billion investment in Peugot.

Hopefully GM's execs have now learned when to cut their losses and not throw good money after bad.

Remember the old joke about Heaven and Hell?

    Heaven Is Where:
    The French are the chefs
    The Italians are the lovers
    The British are the police
    The Germans are the car makers
    And the Swiss make everything run on time

    Hell is Where:
    The British are the chefs
    The Swiss are the lovers
    The French are the car makers
    The Italians make everything run on time
    And the Germans are the police

Further investment in a dying French automaker would be one helluva decision.

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