By on October 23, 2012

The French government will provide multi-billion euro guarantees to GM’s alliance-partner PSA Peugeot-Citroen via PSA’s banking arm, Reuters says. Don’t bet on it happening: There is already opposition from Germany, and wait until Brussels officially hears of the deal.

As explained in the morning, PSA is facing a serious cash dilemma. The French government is ready to provide loan guarantees between $6.5 billion and $9 billion, a reliable source told Reuters. The money will officially go to PSA’s bank, but will benefit PSA immediately. The aid would allow the bank to offer cheaper financing to car buyers, and compete with rival Volkswagen at least when it comes to cheap financing offers.

Also as explained earlier, the aid comes with strong strings attached: Reduced job cuts, French plants stay open, government and worker representatives get a seat on the board.

Also as speculated earlier in the day, it will be hard to impossible to get this package past the EU commissars in Brussels. Already, the German state of Lower Saxony says it will report the deal to Brussels as a possible breach of EU rules, writes Die Welt. Lower Saxony is a shareholder of Volkswagen, which is headquartered in the state.

Brussels has not been informed of any agreement. When notified, the EU regulator examines aid packages for compliance with strict EU rules. “The Commission ensures that there are no protectionist conditions placed on the attribution of aid,” an EU spokesman told Reuters.

In 2009, the EU Commission shot down conditions attached to 6 billion euros of state loans for Peugeot and Renault: “If the help comes with conditions, for instance to keep production in France, then these measures would be illegal and would not be approved by us,” free trade commissar Neelie Kroes said at the time. This time, the opposition likely will be stronger, as German carmakers really don’t mind seeing their French colleagues gasping for air.

Get the latest TTAC e-Newsletter!

14 Comments on “Le Bailout Watch: France To Save Peugeot, Germans Say Verboten...”

  • avatar

    I believe that at this point in time, political considerations will override economic orthodoxy. Not to dramatize, but the EU’s whole being could be called into questions if various European peoples start blaming the EU for their woes.

  • avatar
    Bela Barenyi

    This is such a “hypocrite” behaviour of the German car companies and politicians (yes, I’m looking at you Mr. McAllister).
    I’d bet everything that in a “opposite” situation (read: a struggling German carmaker or even if Volkswagen would be in troubles and near bankcruptcy) Mr. McAllister would say that the EU laws are stupid and the EU can go and put them where sun does not shine. You can bet your life on it that the German government would bail out a German carmaker. German politicans seem to have a short memory. In 2009 the German government made such big fuss about Opel, possible financial aids, conducted countless hours of negotiations with Magna, Fiat and RHJ. Of course, there were lots of people in Germany who objected to aid Opel financially, but the German government would have helped Opel if GM hadn’t canceled the sale of Opel.

  • avatar

    I wonder if Brussels will have the cojones to push the point. The EU is in dire trouble at this time. They really don’t need to be aggressively attempting to surpressing patriotic fervour for local industry. They will lose.

    It would be ironic that it wasn’t the PIIGS that bring down the EU but France and a car company.

  • avatar

    What tools does the EU really have to do anything about it if the French decide that they are going to do it? Kicking out the second most powerful member seems HIGHLY unlikely. The EU only has as much teeth as its members allow it to have, and some of those members are MUCH more equal than others.

    I know – they can send France to bed without supper!

    • 0 avatar

      Answering your question “What tools does the EU really have to do anything about it if the French decide that they are going to do it?”:
      It will cost the French dear, as the EU is entitled to sanction such actions heavily.

      BTW: this is good so, as otherwise the EU would be an even greater mess as it is today. Each and every EU member state would otherwise be allowed to subsidize its own favorite projects for dubious reasons. There have been wonderful swindle stories regarding a massive virtual production of olive oil, for example (tax-subsidized, of course). So, this is not a car industry problem.

      • 0 avatar

        And by what means will they ultimately enforce those sanctions? Seriously, Brussels is pretty toothless – the members ALLOW themselves to be regulated, and there is an awful lot of wink, wink, nudge, nudge already. If it comes down to some “illegal” loan guarantees vs. some fairly large number of French jobs, and French PRIDE, I suspect Brussels will be comprehensively ignored. The car industry is probably the tip of the iceberg in these times.

        This is not like the United States were the Feds can and will hold back Federal funding for all sorts of things to keep an individual state in line.

    • 0 avatar

      Touchè krhodes1.

  • avatar

    Do you think GM’s unlikely engagement with PSA was strategy all along to deal with Merkel and Opel..?

  • avatar

    Wow, the Germans had enough sense to do what it can as one of the United States of Eurasia to try to block a huge taxpayer bailout whilst the € is collapsing, and Europe is about to be set on fire by neo-Communists….

    See, they learned from their Weimar Republic economic collapse (the much storied 1m marks for a loaf of bread) that yielded the German Nazi Party which rose in the harsh economic times of the 1930s. They have been down this road before, and learned from it, hence why they are now a major international trade player.

    France on the other hand, always expects someone else to save their ass. Just sayin’…..

    • 0 avatar

      Well that’s because somebody always does, seemingly inexplicably. Did you also know France is not only a declared nuclear power but also the fifth largest holder of gold in the world?

      All of this for effectively losing two world wars, and the First Indochina War.

Read all comments

Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • ajla: Do you live in Illinois or Missouri? I think fuel station closures is a more regional issue based on overall...
  • dal20402: CHAdeMO is a deal-breaker at this point. Even Nissan’s own newer EVs have moved to J1772. Outside of...
  • Corey Lewis: Hard to believe they kept the horizontal speedo through 1993.
  • Eliyahu: Please! Keep in mind that there are multiple factors which most people have to consider. I’ve been...
  • ajla: 1. The Leaf uses CHAdeMO for fast charging, which is the BetaMax of charging and will likely become unfindable...

New Car Research

Get a Free Dealer Quote

Who We Are

  • Adam Tonge
  • Bozi Tatarevic
  • Corey Lewis
  • Jo Borras
  • Mark Baruth
  • Ronnie Schreiber