Peugeot still in trouble, though not as bad as expected image

Shares in the struggling French auto maker have more than doubled this year, much of the surge coming after it reported consensus-beating first-half results. Also, the rate at which it is bleeding cash is on track to halve from 2012’s level.

All the while, amid rising hope that Europe’s auto market can’t get any worse, Peugeot is even launching new products, with an up-market version of its 308 model due to debut at next month’s Frankfurt Motor Show.

Peugeot looks even more secure than at the end of 2012 as the European Commission last month agreed to let the French government guarantee up to €7 billion ($9.36 billion) of future debt issuance by the group’s financing arm, Banque PSA Finance.
That should allow Peugeot to carry on offering its customers competitive financing deals to buy vehicles. A cost-cutting plan including 6,500 job losses at plants in France is on track, while Peugeot reduced its investment spending by nearly 40% in the first half.

Peugeot also has options to reduce its €3.3 billion net debt pile, as selling half of its stake in PSA Finance could raise €1.7 billion, while its 57% stake in auto parts subsidiary Faurecia would take another €1.9 billion of debt off Peugeot’s books.

Still, prosperity is a long way ahead, as even on optimistic forecasts the division may stop making losses only in 2015, assuming Peugeot’s auto sales will have by then stopped declining, quite a reverse given they fell 13.3% in the first half in Europe, Peugeot’s key market.