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 …)