Tags: Peugeot | GM | taxpayers | bailout

Now You’re Bailing Out Peugeot in Addition to GM

By    |   Friday, 09 March 2012 12:15 PM

American taxpayers are now bailing out the French auto maker Peugeot as a result of the U.S. government bailout of General Motors.

It works like this: U.S. taxpayers still own about 25 percent of GM. And last week GM announced that it will buy a 7 percent stake in Peugeot for about 320 million euros ($420 million).

That means U.S. taxpayers will own about 1.75 percent of Peugeot.

Editor's Note: You Deserve to Know What Obama and Bernanke Are Hiding From Americans

That may not be a good thing. Last year, Peugeot’s auto making division lost $123 million, ABC news reports. Just last week, Moody’s downgraded Peugeot’s credit rating to junk, with a negative outlook, thanks to “severe deterioration” of its finances.

GM says it wants in on Peugeot’s strong small car and hybrid vehicle technology expertise. And GM believes the deal will ultimately generate cost savings for both companies as they pool resources.

But auto experts aren’t convinced.

It is “somewhat baffling that GM is willing to get involved in an alliance that it frankly does not need for size or complexity, while still avoiding any public plan to rationalize its European production, cut costs, or deal with labor rates,” according to an analysis by auto industry consultants IHS obtained by ABC.

Auto analysts tell The Wall Street Journal that the tie-up doesn't deal with the problem of chronic overcapacity in Europe’s auto industry, estimated at 20 percent or more.

Editor's Note: You Deserve to Know What Obama and Bernanke Are Hiding From Americans

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