France protects the French – it’s PSA’s turn now image

Rumors over the capital increase and declining sales figures for September have sunk Peugeot’s shares 20% so far this week, and the French government is mulling for the first time whether taking a stake in Peugeot Citroen would protect the country’s industrial interest.

The state’s reported intervention would be in line with the deal under negotiation between PSA Peugeot Citroen and carmaker Dongfeng about a capital backing from the Chinese group, which is already a partner in producing the French company’s cars in China.

According to people close to the proceedings, the government is considering taking a stake in PSA as well, which would help the carmaker by gaining more money and also maintain French control, as any stake going to the Chinese would become politically sensitive.

“The French government has looked at what the US has done with the US automakers and the success of that since and as such, if needed, are ready to provide similar assistance,” says a person with knowledge of the talks.

A Chinese newspaper last week reproted Dongfeng was in talks over a €3bn capital hike, citing a single, unidentified, source. An injection near that size would almost certainly result in the Peugeot family ceding control of the business it founded back in 1882.

Via Financial Times