It is early days for the purchasing and platform sharing agreement between GM and PSA, but work has already started to integrate the companies’ engineering and buying operations.
Where it will all lead to is a $2b a year saving — $1b a year each — in costs, which from the outside seems like a significant number. Steel, for example, is a pricey commodity that car companies buy in large quantities — PSA buys 2m tonnes a year and GM globally 6m – so by combining the two, the Alliance will concentrate contracts for 8m tonnes, which should bring savings. PSA, incidentally, puts its steel contract out for tender every six months.
To this end, the two are forging ahead with new organisations to get all this up and running.
According to the genial Frederic St Geours, PSA’s director-general and one of the architects of the Alliance, preparatory work started in earnest on March 1st.
To co-ordinate the efforts, an 8-strong steering committee made up of four directors form each company will manage the Alliance. One of the main functions of that committee will be to oversee the four platform organisations that they’ve agreed to share resources on — B and D segments, crossovers and MPVs.
St Geours says the C-segment is excluded because PSA will have a new 308 in 18 months time, which makes platform sharing impractical in the short-term. And for now, the A-segment is also excluded because PSA has a joint venture with Toyota.
One idea forming is that a co-ordinating management group will sit between the steering committee and platform teams and GM has already ear-marked one of its top engineers for that spot — Uli Schmalohr. He was vehicle line executive for the new global Gamma platform, a project run from Korea, and seen as experienced in the organisation of multi-national projects.
Schmalohr also had a key role in the Corsa/Punto project which produced joint superminis when Fiat and GM were in Alliance a few years back. PSA will likely find a similar appointee to balance the organisation — ‘double-heading’ as one engineer described it.
The detalied organisation of the four platform teams is yet to be agreed, an idea is forming that each will be headed up by either a GM or PSA engineer, with the deputy allocated from the other company to balance the decision-making — ‘double-heading’ again.
When you delve into the detail of what these platform teams will have to cope with, it does get complicated.
The cross-over and D-segment teams, for example, will have to feed in requirements for GM’s US and China markets, plus GM and PSA’s European-focused requirements — Citroen and Peugeot.
From the outside it sounds like a witches brew of engineering compromises, in-fighting and departmental rivalry.
One GM engineer I quizzed at Geneva could only laugh as he recounted the organisational difficulties of getting European and Chinese colleagues inside GM's Chinese joint ventures to agree compromises.
Similar disputes accounted for the Renault-Volvo and Fiat-GM Alliances, although Nissan-Renault has prospered.
What remains unclear though, is whether all this upheaval is worthwhile considering the savings being mentioned.In Europe, GM and PSA each spend around $30b a year in Europe on purchased parts and materials, add in GM’s global operations and its bill rises to £125bn.
Which makes the $1b saving that GM and PSA are each said to be ready to bank, a relatively small number. Only time will tell if this Alliance turns out to be worth the effort.