Tags: Peugeot | France | Dongfeng | layoffs

Peugeot Said to Weigh Stake Sales to Dongfeng, French Government

Monday, 14 Oct 2013 07:38 AM

PSA Peugeot Citroen is considering stake sales to Dongfeng Motor Corp. and the French government to shore up its finances as car sales in Europe plunge to a 20-year low, people familiar with the matter said.

Peugeot’s board will consider a capital increase at a scheduled meeting on Oct. 22, said the people, who asked not to be identified because the gathering is private. The stock fell as much as 12 percent, the biggest drop in almost five years, after Reuters first reported details of the possible sale.

The French government is monitoring the talks with Dongfeng, and may participate should the Chinese automaker decide in favor of a purchase, two of the people said. The negotiations are at an early stage and not expected to be completed for several weeks, they said.

A capital increase would provide Peugeot with needed cash and also help in efforts to expand outside Europe, where the auto market is set to shrink a sixth straight year. Peugeot, which reported a first-half operating loss in its automotive unit of 510 million euros ($692 million), is cutting 11,200 French jobs and closing a factory outside Paris. The automaker has pledged to reduce its cash-consumption rate by 50 percent in 2013 after burning through 3 billion euros last year.

Peugeot is “examining industrial and commercial developments with different partners, including the financial implications that would result from them,” the Paris-based automaker said in a statement today, without providing details. “None of these projects has reached maturity yet.” Dongfeng declined to comment.

Shares Plunge

Dongfeng plans to buy a 30 percent stake for 10 billion yuan ($1.63 billion), China Business News reported Oct. 8, citing an unidentified official from the Chinese company. Peugeot intends to sell 3 billion euros of new stock, with Dongfeng and the French government taking matching holdings, Reuters reported Oct. 12, citing three unidentified people.

Peugeot shares plunged as much as 1.47 euros to 10.90 euros, the most since Nov. 6, 2008, and were down 9.3 percent as of 12:26 p.m. in Paris trading. The stock has more than doubled this year, valuing the French manufacturer at 3.98 billion euros.

“The situation is dire,” David Arnold, a London-based industry specialist at Barclays Capital, said in an e-mail to clients. “It’s clear that cash is now much more of a drag and the company realizes that it cannot starve the business of investment or it will lose out long term.”

Dongfeng said last month that the company is doing “preliminary research” on a Peugeot investment. Peugeot said in September it was examining all options to deepen the current Dongfeng partnership, with a focus first on industrial cooperation before financial links. Peugeot and Dongfeng already operate three assembly plants together in China, the world’s largest auto market.

“The state remains interested in Peugeot,” French Finance Minister Pierre Moscovici said today on France Inter radio, without providing additional details. “What has to come before everything else is the industrial strategy, the industrial partners.”

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PSA Peugeot Citroen is considering stake sales to Dongfeng Motor Corp. and the French government to shore up its finances as car sales in Europe plunge to a 20-year low, people familiar with the matter said.
Peugeot,France,Dongfeng,layoffs
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Monday, 14 Oct 2013 07:38 AM
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