French state investment in PSA actually bends rules image

We thought we already knew all there is to know about PSA’s 3 billion euros capital injection made by China’s Donfeng and the French state. Well, t actually turns out the latter had some rule bending to do.

Last week’s official confirmation of the long debated, heated and reported deal that would see Dongfeng Motors and the French state take matching stakes in the ailing automaker, diluting the Peugeot family’s stake to the same 14% has raised many questions and concerns from industry observers and analysts.

In this story, we’ll just focus on one – the French state cleverly circumvented EU policies that prevent and regulate state aid to companies. The European regulators cannot call on the government because it’s investing the same €800 million amount as a private company. Still, Dongfeng’s owner actually has the Chinese state as its patron.

And, as a matter of fact, which we can clearly see from the other deal PSA struck – a financing one with Madrid’s Banco Santander that aims to replace state guarantees – the French government already bailed the carmaker once – in a huge 7 billion euro financing guarantee.

PSA is on a long way ahead to return to profitability, as the French state’s aid also comes with compromises – like no French factory closures, that would protect jobs, but ultimately hamper the already long overdue restructuring plan – the company already lost more than the 7 billion euros bailout guarantee in the last two years alone.

Via Financial Times