Peugeot Faces European Union Probe on Restructuring Plan image

PSA Peugeot Citroen currently faces an in-depth European Union probe to see if the 7 billion euro offered by the French government as bond guarantees are in accord with the antitrust rules.

The European Commission is to decide if this aid would affect competition and if the automaker’s restructuring plan, which includes laying off employees and a plant closing, will restore the company’s finances and help it continue without state support. The French automaker needs the state guarantees o help its financing unit, which is the key to offering loans for customers that are competitive with those offered by VW and other rivals.

“Today’s announcement is clearly negative,” said Sascha Gommel, an analyst at Commerzbank in Frankfurt with a reduce rating on the shares. “PSA would have problems to access bond markets without government support at the moment. However, we regard it as rather unlikely that the EU Commission or France will allow PSA to go out of business.”

Last month a court in France approved Peugeot’s restructuring plan and so did most of the automaker’s labor unions. Peugeot plans to cut 17% of its workforce in France, close the Aulnay plant, sell assets and build a strategic partnership with GM.

“My belief is that the state did what it had to do so that the PSA bank could finance itself in a satisfactory way,” Finance Minister Pierre Moscovici said in Paris. “We discussed the matter with European Commission and we continue to discuss it. What we did was completely in line with European law.”

Source: Bloomberg