Two sources that have knowledge of the matter said PSA Peugeot Citroen is now finally free to concentrate on the reported deal with Dongfeng and the French government, as the company secured a deal with unions to cut down its operating costs.
Unions, which make more than 60% of workers, said yesterday they agreed to back a proposal to reduce overtime pay and freeze salaries in exchange for investment guarantees and new models to boost dwindling capacity utilization. Peugeot had a first-half operating loss in its automotive unit of 510 million euros, and is now searching a way to raise money for development spending and a much needed expansion out of Europe.
“The shares have been pretty volatile in recent weeks due to ongoing rumors regarding government participation,” said Sascha Gommel, a Frankfurt-based analyst at Commerzbank AG who recommends selling the stock. “It would be clearly negative if the French government is getting involved because it would dilute the restructuring measures as the government wants to protect jobs in France.”
Peugeot went down 2.5% to close at 10.54 euros in Paris trading yesterday. The stock has jumped 93% this year, valuing the Paris-based automaker at 3.74 billion euros.
Four of the six main unions, the CFE-CGC, SIA, CFTC and FO, have told Bloomberg they agreed to the cuts in labor costs. The CFDT hasn’t made a decision yet, while the CGT said it wouldn’t back the plan.