GENERAL Motors and France's PSA Peugeot Citroen have unveiled a strategic alliance that will see the US auto giant take a small stake in Europe's No. 2 carmaker.

The companies said on Wednesday that their plans to share vehicle platforms and pool the purchasing of components and services will save them US$2 billion a year within five years, split roughly equally.

GM intends to take a 7 percent stake in the French automaker via a US$1 billion capital increase, which will make GM the second-largest shareholder in the French company behind the Peugeot family, which has controlled its namesake enterprise since its founding over two centuries ago.

The two firms are seeking efficiencies to survive Europe's competitive and oversupplied car market. A large number of manufacturers and low prices mean carmakers can't make much profit per vehicle.