Feb 29 - Today's announcement by General Motors Co. (GM) that it plans to enter into a long-term alliance with PSA Peugeot Citroen (PSA) has no effect on GM's ratings. As part of the alliance agreement, GM has agreed to make an equity investment in PSA that will give GM a 7% stake in the French automaker. Although specifics have not been reported, Fitch Ratings estimates that GM's investment will be in the $350 million-$400 million range. We regard the investment in PSA as manageable in light of GM's solid liquidity position, including $32 billion of cash and marketable securities on the balance sheet at year-end 2011. While expanded cooperation with PSA could eventually help drive cash flow improvements for GM's loss-making Opel division in Europe, the proposed alliance offers no help with respect to the fundamental problem of overcapacity in the European auto market. However, both companies will continue to work on their individual cost savings and rationalization plans. Although the GM-PSA alliance is more comprehensive than many, we note that alliances in the global auto industry are relatively common. GM's 'BB' issuer default rating (IDR) captures our expectation that the automaker will continue to make periodic investments in ventures of the type disclosed today, and GM noted that today's announcement does not affect its other global ventures. In addition, relative to the company's cash position and annual FCF generation, the PSA equity investment is relatively small. However, we note that the track record of recent global auto alliances has been mixed, and the GM-PSA partnership will not achieve its most significant financial synergies for several years, limiting the near-term benefit on GM's financial performance. In connection with the alliance agreement, PSA has entered into a EUR1 billion rights offering that will bolster the French automaker's liquidity position at a time when auto sales in Europe remain under heavy pressure, with no signs of progress toward addressing the European industry's lingering overcapacity problem. GM's investment in PSA is being made pursuant to this agreement. The GM-PSA alliance will involve cooperation in two distinct areas, including platform and technology sharing, and global purchasing, with estimated steady-state annualized benefits of $2 billion. The companies estimate that the benefits will be shared about equally between the two, but have noted that full benefits will likely not be realized until five years out. As part of the purchasing portion of the alliance, GM plans to enter into a commercial cooperation agreement with PSA's Gefco subsidiary, which will provide logistics savings in certain regions. No cadence on the roll-out of synergies has been reported, but the most significant savings are likely to be achieved only after the companies begin sharing platforms, with the first alliance product planned for launch in 2016. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.