Peugeot Walks Away from Opel Merger

Peugeot, though in desperate need for a cash infusion, will not try to bolster its fortunes through a merger with General Motors Co.'s (NYSE: GM) Opel division, according to Autogazette.

Its ability to hold out may only last so long. Car sales in Europe have plunged due to the deep recession in the area. Most manufacturers are left with too many workers and too many factories. Unions and local government muscle make broad layoffs difficult.

Opel has lost money every year for more than a decade. Investors view it as GM's Achilles Heel. The number one U.S. car company might believe that a tie-up with Peugeot would create economies of scale in management, product development and manufacturing. However, unions and governments that want to force private companies to help their economies by eliminating layoffs would pressure a joint venture as much as either company individually.

Consolidation makes sense on paper, but not in the real world of Europe.

Douglas A. McIntyre

Filed under: 24/7 Wall St. Wire, Autos, Mergers & Acquisitions Tagged: featured, GM