By on December 21, 2012

We did not believe that EU regulators would let France’s government bailout of GM’s alliance partner PSA skate through unchallenged. State aid to companies is against EU rules, and refinancing of Banque PSA Finance is state aid EU Competition Commissioner Joaquin Almunia wrote in a letter to the French government. This according to a report in the French daily Les Echos.

The clever French thought that by propping up PSA’s bank instead of PSA directly, the aid would be legal. EU governments may help banks, but not other companies. The EU competition commissioner does not quite buy this argument.

The EU stumbled over the hard to miss fact that the aid comes with strong strings attached: Reduced job cuts, French plants stay open, government and worker representatives get a seat on the board of PSA. A bank does not commit to car plants remaining in the country.

“The EU objections follow a formal complaint received by Brussels from an unidentified Peugeot competitor,” says Reuters.  The German state of Lower Saxony said it would report the deal to Brussels as a possible breach of EU rules. Lower Saxony is a shareholder of Volkswagen, which is headquartered in the state.

France is a repeat offender. In 2010, Almunia objected to a government loan to Renault, There was a clause in the agreement that required that within two years, Renault has to buy 70 percent of the parts from French suppliers. In 2009, the French government tried to link loans for PSA and Renault with keeping jobs in France. Brussels showed the yellow card, and Nicolas Sarkozy watered the clause down to a “moral obligation.”

However, using Brussels as the bogeyman is part of the Europe political theater. Act 1: Government comes to the rescue to save jobs. Act 2: Brussels objects. Act 3: Government says: “We tried.” Act 4: Government saves face and money.

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One Comment on “Le Bailout: Brussels Objects To France’s Lifeline For PSA...”

  • avatar

    It’s unfortunate that the US does’t’t have similar rules.

    Despite apparents success for the moment, how much have the GM and (repeated) Chrysler bailouts cost he US taxpayer, and how is genuine competition served? If GM, in particular had reverted back to its original car companies, that would have been appropriate, since both Japan and Germany, much larger than the US , have 6-7, and we have 3.


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