By on October 23, 2012

Tomorrow, GM’s sick French partner PSA Peugeot Citroen will publish quarterly sales. They are expected to be très dégoûtant, and will set off a chain reaction:  The credit rating agencies will put PSA’s already alarming rating down a notch further to near-dead status. Its captive financing arm BPF, a bank in its own right, will go down with the mothership. The bank’s rating is not allowed to stay more than two notches above the parent.  This will drag the bank into junk bond territory, and borrowing costs will explode. The French government is here to help – for a price.

According to Reuters, French industry minister Arnaud Montebourg demands that PSA puts government and worker representatives to its board, scales back job cuts and keeps plants open. Then, the government would consider bailing out the bank.

Montebourg also made ominous hints that he would “weigh the consequences” of Peugeot’s alliance with General Motors, which he never liked,

The government help will raise more than eyebrows in Brussels. While government aid to banks is allowed under EU rules, company bailouts are not. By connecting aid to PSA’s bank with conditions for the automaking arm, the French government would cross the line in Brussels. Brussels has a wary eye on the interventionist French anyway.

This will get ugly. For PSA and GM. If the French government gets too demanding, there would remain only one consequence:

PSA’s bailout by GM.  (After November 6, please …)

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12 Comments on “PSA In Deep Merde, Bailout By French Government – Or GM?...”


  • avatar
    rmwill

    Did GM get sucked into another Fiat like arrangement?

  • avatar
    kitzler

    this smells of degueulasse, the french will never let Peugeot sink, matter of national pride, I guess

  • avatar
    Pastor Glenn

    No, kitzler, I respectfully disagree. France is in the ‘merde’ themselves, having signed off any national rights by joining and sitting back while the EU became the new nation, and Brussels became their Washington DC. France is but a “province” much as in Canada, where like it or not, Ottawa rules the roost.

    As for GM “saving” PSA – nope. Aintgonnahappen dot com, before or after the election.

    The Chinese will own PSA and they learned well from GM who strung Daewoo along until GM could get it for a penny on the pound after the Asian Financial Crisis hit. If you don’t believe me, ask anyone who used to work for MG-Rover.

    • 0 avatar
      Pch101

      “France is in the ‘merde’ themselves, having signed off any national rights by joining and sitting back while the EU became the new nation, and Brussels became their Washington DC.”

      Where did you get that from? The French and Germans effectively run the EU together. Brussels is an ugly town with office buildings, not the real center of power.

      • 0 avatar
        Pastor Glenn

        Pch, so do you deny that the EU bureaucracy and EU politicians are in charge of “everything” in the EU?

        Take note please, that the Germans may be in total Kontrol of the EU economically; but the ‘selected’ United States of Europe capital is actually, that ugly town with office buildings you wrote of.

        Otherwise, could not the French Government simply hand over French tax monies to PSA to bail them out; hand over part ownership of PSA to the French union; screw over the PSA bondholders; and punish companies importing cars into France?

        You know, kind of like the guy in Washington DC and his cronies did awhile back for GM and Fiatsler.

        The reality in Europe is different. Sad as I am to say it, Europe is actually (like it or not) currently run by means of law; not by the whims of a man and his cronies.

        Yeah, I am saying the USA is no longer fundamentally under the rule of law.

        Why do you suppose nobody in their right mind is investing in jobs in this country, either citizens or outsiders? You’d have to be nutz…. and most people capable of making money, are not nutz.

      • 0 avatar
        Pch101

        Aside from knowing that there is a town called Brussels, you don’t seem to know much of anything about Europe.

        The French and Germans carry the show in the EU. If they both want to bailout the auto industry, then they will find a way to make it happen.

        But that isn’t going to happen if it’s just the French on their own. They would need the Germans to support it and the Germans would need to be motivated.

        On the other hand, the Germans would have something to worry about if Opel and Peugeot were to marry and then fail simultaneously without GM ready to infuse money into it. Peugeot won’t become a European problem unless and until it becomes a German problem. If the French and GM are smart, they will figure out how to make it a German problem.

  • avatar

    The trick for GM will be to smush Opel into PSA and flee while making that *look* like an earnest effort to save PSA.

    Akerson may not be an auto-business expert, but he *is* a deal-making expert. This could get really interesting.

  • avatar

    EU can’t push the French too hard. The EU is at a critical juncture and European peoples could turn on them if they perceive it as the culprit for their predicament. Seems like some political finesse is in order and the French are going to push the limits to see how much they can get away with.

  • avatar
    el scotto

    It seems Montebourg is living in some alternative universe where the Euro is strong and France can dump cash into any French industry it likes.

  • avatar
    Polar Bear

    American tax money (via GM) to bail out a French car maker? Please let it happen. Imagine what the talking heads on Fox News will say.

  • avatar
    Pch101

    If it were me, I would create a new entity. The new entity would own Peugeot the automaker and Opel the automaker.

    The Peugeot bank would be maintained as a separate entity. The shares of the new Peugeot-Opel could be distributed to GM, the current PSA shareholders, and whoever else needs to own them.

    GM’s admission fee to the party would be to throw some cash at the new entity, just enough to get it started. This would cost GM less than it would to directly close down plants. This would also free GM to continue to push Chevrolet into the market, and maintain its plan to sell cheap Korean cars via that division.

    The spin out of the bank would allow it to function and grow its business elsewhere without it being dragged down by the car company.

    If the new car company fails, then it drags the Germans into it. Since GM would not be on the hook at that point for fixing the Opel piece of the problem, that would provide more leverage for a government-funded bailout.

    If the French and Germans are both motivated to throw money at it, then they’ll find a way to make that bailout happen. A unified Peugeot-Opel with some legal distance between itself and GM would turn a French problem into a European problem.


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