Peugeot Close the End, Will the French Government Save the Automaker? image

It seems that PSA Peugeot Citroen will not be able to further cope with the expanding losses and the dramatic sales drop.

The situation in Europe continues to draw a hole in Peugeot’s budget, forcing the automaker to seek help anywhere it can think of. It’s been several months since the French automaker has tries to convince GM to invest additional funds, but yesterday, the US automaker said that it has no plans to make further investments in the loss-making automaker.

“We have no intention of investing additional funds into PSA at this time,” a GM spokesman said in an email on Thursday.

Peugeot has also talked to Dongfeng, its Chinese partner, to buy a stake in the French company and expand an industrial alliance, according to an anonymous source. Among the refusals, the French automaker might not have another option but to turn itself around, as sales during the first months of this year dropped 14%.

The automaker restructuring plan includes laying off 11,000 employees in France and closing a plant near Paris. Peugeot and GM have signed a deal, according to which the French automaker sells a 7% stake for $400 million and also share development costs for several models. But the JV’s plans have not been materialized yet. Although the government is concerned about Peugeot’s situation, it will like to avoid buying a stake in the automaker.

“They’re burning cash, and even if they have a big cushion, I just don’t see it stopping anytime soon,” said one person familiar with the discussions at the French government.

The Peugeot family, which currently has a 38.1% shareholder vote, is willing to give up the company if necessary. The family has been the main problem why the company has not succeeded, as their jealously guarded the automaker’s independence.

Source: wsj.com