By on February 19, 2014

2011 Peugeot China 508 With Couple

The 3 billion euro ($4.1 billion USD) three-way deal between PSA Peugeot Citroen, Dongfeng and the French government, signed this week, is set to inject new capital and a much needed life extension for Peugeot, though at the expense of the Peugeot family ceding control after two centuries.

Reuters reports Dongfeng and the French government will each pay 800 million euros ($1.10 billion) for a 14 percent stake in the new alliance while existing shareholders will receive warrants entitling them to purchase new stock at 7.50 euro, ultimately adding 1 billion euros to the memorandum of understanding signed by the three parties. In return, the Peugeot family’s 25.4 percent stake and 38 percent of voting rights in their namesake company will be brought to parity with their new partners, ceding control after over 200 years of business while surviving the end of guarantees totaling 7 billion euros next year.

Aside from the new infusion of capital, the MOU calls for Peugeot and Dongfeng to sell 1.5 million units annually beginning in 2020, jointly establish an R&D center in Dongfeng’s home market, and consider a new sales wing focused specifically upon Southeast Asia. The third point in the MOU would allow Peugeot to fare better than it does currently, having only sold 6,500 units last year in its largest regional market, Malaysia.

As for Peugeot’s home market and the European market as a whole, analysts warn the MOU doesn’t address how Peugeot will address the ongoing problems the automaker has undergone over the past several years. Though some suggested freezing investments and selling more plants to save itself, French industry minister Arnaud Montebourg stated no further closures were “on the agenda.”

The deal will be formally signed in late March around the time of China’s president Xi Jinping visit to Paris.

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8 Comments on “PSA-Donfeng Deal Injects New Capital, Extended Life Into Peugeot...”

  • avatar

    It’s worth providing some general perspective as to why Chinese corps are buying up western brands (ie labels) for good money, and it’s not necessarily for the technology or staff.

    Consider that Nike makes some shoes in Asia for maybe ~$10 apiece and sells them for >$50. That’s a very healthy profit even factoring retailer markup. OTOH, the asian factory’s $10 cut is paying slave wages and its proprietor in heavy competition with his largely fungible peers.

    Cars are generally less interchangeable but the point is that the chinese are well within striking distance in the next gen or two for auto tech, but need that label (and perhaps dealer network) to appease western audiences and more sophisticated home buyers alike. They bid high because the value-add of the brand is greater to them than someone who already has a name of their own.

    This is pretty basic business sense, but comes up every time the lastest acq deal from developing nations is deemed to be shockingly expensive.

    • 0 avatar

      Well, it’s a smart shortcut.

      Instead of spending decades moving up the brand ladder from joke to trusted premium product, as it could be the Japanese did and Koreans are doing, the Chinese are going to straight up buy brand recognition.

      They’ve bought the Swedes, now they’re going after weak French companies.

    • 0 avatar
      SCE to AUX

      It would be wiser to buy healthy brands – not Peugeot or Fisker, for crying out loud. Being Chinese and cash-rich doesn’t make one smart.

      These complex deals never work out. Especially one like this which dictates sales volumes as though it can happen by merely saying so – typically communist.

      • 0 avatar

        >These complex deals never work out. Especially one like this which dictates sales volumes as though it can happen by merely saying so – typically communist.

        Most exceptional americans don’t realize that the success of the asian powers (japan, korea, now china) largely come from proper industrial planning of the economy to launch from making shoes to cars/smartphones and beyond. This is hardly any secret, even those who can’t be bothered to read can see the formula at play; so the question is what blinds so many to simple reality.

      • 0 avatar

        Why not Peugeot or Fisker?

        Brand recognition matters to buyers. Neither the average Volvo buyer, nor the general public knows that Volvo is now owned by the Chinese. Most people still think “Swedish” which is associated with safe and simple but sophisticated.

        OTOH, the reputation for Chinese manufactured goods is lower than earthworm poop. As I related in another thread, Africans will literally tell me they don’t want the Chinese stuff (tools, generators, etc).

        To guys who read car blogs every day, Peugeot and Fisker aren’t healthy for a reason, but you’d still rather get into one of those than something the Chinese produced.

  • avatar

    That should make Lieutenant Columbo happy anyway. God rest Peter Falk’s soul.

  • avatar
    Rod Panhard

    Hey Beavis…he said dong. Heh-heh…heh-heh-heh….

  • avatar

    Wait until the Chinese buy GM.
    “When better Buicks are built, China will build them”.

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