PSA Peugeot Citroen, the French carmaker so deeply hit by the economic slump in the European region, has unveiled a 1.1 billion euro ($1.52 billion) write-down at its ailing overseas operations and won GM’s backing for the tie-up with China’s Dongfeng.
As the Paris-based carmaker acknowledged it is actively pursuing a deal with Dongfeng Motor Group, underpinned by a capital increase that would also see the French state get a share, Peugeot and GM also lowered savings goals for their scaled-down alliance.
PSA shares fell as much as 8.4 % on the write-down and after a source told Reuters the company’s board had approved a draft deal including a 3.5 billion euro capital increase at a 40 % discount.
The impairment, following a similar 4.7 billion euro hit on 2012 earnings, reflects weaker currencies and sales outlooks in Russia and Latin America, Chief Financial Officer Jean-Baptiste de Chatillon told reporters.
Peugeot’s plant in Kaluga, Russia is among production investments “whose book value is no longer covered by future cash flows”, Chatillon said on a conference call. “This will impact group operating income.”
Peugeot’s manufacturing division recorded a 510 million euro operating loss in the first half, before one-off adjustments. The company nonetheless reiterated its 2013 goal of halving last year’s negative 3 billion euro operating cash flow.
Paris-based Peugeot and GM also trimmed their 2018 savings goal from a troubled European alliance plan announced early last year. Both companies said they now expected an evenly split $1.2 billion in annual cost savings by 2018, a 40 % reduction from the $2 billion initially promised.