Will General Motors Company (GM) Buy This French Automaker?

That’s not a given: Peugeot has five factories in France, and the French government really, really doesn’t want to see those jobs lost. IHS Automotive estimates that those factories ran at 71% of capacity last year; a rule of thumb is that auto factories break even at about 80% of capacity.

And the last thing GM needs in Europe is more underutilized, money-losing factories.

Will GM really consider this?

Reuters, citing inside sources, reported that GM has been willing to discuss the idea – but only if it receives assurances that it will be able to make the necessary drastic cuts without huge costs, like the $750 million in lavish separation payments that Ford Motor Company (NYSE:F) will make to workers to close a factory in Belgium.

That’s probably the smart answer, but it seems unlikely to work out that way. Reuters says that while French officials understand that Peugeot needs a deal with a global automaker, they “remain determined to preserve Peugeot’s French sites and jobs”.

Meanwhile, GM, which has already moved to close one of Opel’s four German factories, is under pressure to preserve that company’s remaining jobs as well. In both cases, the government pressure is probably unrealistic given the harsh market realities – but that doesn’t make it easier for GM to find a cost-effective way forward.

Long story short, it seems unlikely that GM will take over Peugeot as of this moment – but it’s not impossible that something could come of this. Stay tuned.

The article Will GM Buy This French Automaker? originally appeared on Fool.com and is written by John Rosevear.

Fool contributor John Rosevear owns shares of Ford and General Motors. Follow him on Twitter at @jrosevear. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford.

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