Reuters has reported that Chinese automaker Dongfeng and the French government will be taking equity stakes in PSA/Peugeot-Citroen after injecting $4.1 billion into PSA. Under the draft agreement, which is still being negotiated, Dongfeng Motor and the French government will each put 1.5 billion euros into the French automaker, with each of those parties getting a 20 to 30 percent share in the company.
As a result, the Peugeot family, which currently owns 25.4% of PSA, will find its holdings diluted below controlling levels. The sale will also dilute General Motors’ 7% share of PSA. Part of the increased capitalization will come from a sale of stock to the French government by the Peugeots, while the remainder will be raised through a reserved capital increase. The 3 billion euros put into PSA would be the equivalent of 68% of the company’s current market value.
The company declined to give any details, but a spokesman said, ”Peugeot confirms it is studying new industrial and commercial projects with different partners, as well as the financing to accompany them. None of these plans have yet reached an advanced stage.”
French Finance Minister Pierre Moscovici, speaking to reporters at the annual meeting of the International Monetary Fund (IMF) in Washington did not deny the French government’s involvement. “The issue is not primarily about the French government or a carmaker buying into the PSA capital but about developing good industrial partnerships for PSA,” he said.
Some of PSA’s labor unions in France are cautiously supportive. Xavier Lellasseux, spokesman for PSA’s second-largest union, CFDT, said it is “absolutely vital” for the automaker to have a capital increase but he wanted to be sure that the company remains under French control. “It would be good if there was still a control by all French shareholders which would limit the ambitions of one or the other incoming shareholders,” he said. Christian Lafaye of Force Ouvriere union said, “We can’t deny that the Chinese have the wind behind them and the money.”
The union representing PSA managers, CGC, was more skeptical. ”It might be enough to keep activities going but it’s not certain it would save all the jobs because PSA’s market share is continuing to fall,” a CGC spokesman said.
PSA sales were down 18% in August, and its market share has dropped to 11% so far this year, almost a full percentage point decline. The company lost 5 billion euros ($6.6 billion) last year. In July PSA announced that it expected to reduce the cash burn in 2013 to 1.5 billion euros.