French Paper: PSA Low On Cash
May 29th, 2013 9:07 AM
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PSA Peugeot Citroen told Reuters it is not true that it is low on cash, and that it needs to ask shareholders for an infusion. France’s La Tribune says that Peugeot is looking at a capital raise after burning through 2.5 billion euros ($3.23 billion) of cash in the past year.
“A capital increase is not on the agenda since the financial security of the group … is at a high level and was reinforced in the first quarter by the success of bond issues,” a PSA spokesman told Reuters, pointing to the 7.3 billion euros in cash reserves and 3.2 billion in undrawn lines of credit the group had as of the end of last year.
PSA, a partner of GM, does not expect a return to profit until 2015. Peugeot entered wage negotiations with the unions.
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Its increasingly likely that PSA won't survive in its current form. OECD just cut Europe's growth forecast. German's top banker at Deutsche Bundesbank, Jens Weidmann, said outright that the European crisis is far from over and is years away from recovery. 2015 for profitability is looking surprisingly optimistic. Given the rate of negative cash flow, its looking unlikely PSA will survive to see a recovery in the European automotive market. At this point, it might be a good time to think what would happen to PSA. Massive French bailout? Cash injection from a Chinese company? Acquisition by a rival (Renault? VW?).
I would not be surprised if the famously dirigiste French state saves PSA if it needs to be saved, European Union competition rules be damned. Such as via a forced merger with Renault. May I suggest the name French Leyland?
It cost GM $2 Billion to get out of Fiat. I wonder how much it will cost to get out of this deal.