Dongfeng in China and PSA Extend Joint Venture to Smooth PSA & FCA Merger

China’s Dongfeng Motor Group said on Thursday it had agreed with Groupe PSA to extend the duration of their joint venture Dongfeng Peugeot Citroën Automobiles (DPCA), despite Dongfeng reducing its stake in PSA, to help smooth PSA’s merger with Fiat Chrysler Automobiles.

Dongfeng said that under the deal, DPCA would have exclusive rights to PSA’s Opel cars should the partners agree to bring the brand to China, enjoy lower prices on car parts imported from PSA, and will benefit from new technologies and intellectual properties.

We find it interesting that Opel seems to be the jewel in this deal and there is no mention of shoring up Citroën’s presence in China.

The announcement comes a day after the companies said Dongfeng would reduce its 12.2% stake in PSA by selling 30.7 million shares to the French company.

Analysts said the move could smooth U.S. regulatory approval for PSA’s roughly $50 billion merger with Fiat Chrysler Automobiles.

The sale of Dongfeng’s shares in PSA, worth around 680 million euros ($757 million US), will leave the Chinese group holding around 4.5% of the merged PSA-FCA, which is set to become the world’s fourth-biggest carmaker by sales volume.

“As the cooperation between Dongfeng and PSA deepens, we expect the joint venture to continue making good progress in China,” a Dongfeng representative said.

Earlier this year, a document seen by Reuters showed Dongfeng and PSA plan to cut jobs at Wuhan-based DPCA and reduce its number of car plants to try to make the venture more profitable.