So how bad the situation is at PSA Peugeot Citroen? image

Gruppo PSA or Peugeot Citroen Group is Europe’s largest carmaker and the eighth-largest in the world measured by 2010 unit production. True.

Is a giant company that was funded on 1976 when Peugeot S.A. acquired a 38.2% share of Citroën. PSA is based in Europe and most of the vehicles they produce are for the European market. And here is the big problem.

Europe is not buying anymore PSA’s vehicles ( but not only those made by PSA ) because of its debt crisis that is affecting everyone. So, what’s the problem? The problem is that these companies like PSA are facing overcapacity. So what? Well – keeping factories at low capacity levels is a risky and costly business – because you have employees that you have to pay but they do nothing; and you can’t fire them because of unions – you have the technology that is getting old, you have credit lines that you must pay … and the first-half capacity utilization rate at Peugeot’s factories dropped to 76 percent from 86 percent a year earlier according to official data released by the automaker.

So the company must start to cut somewhere …
After shutting down its endurance racing program last January PSA sold its 548,000 square-foot headquarters in the French capital of Paris to a real estate division of Canada’s Caisse de dépôt et placement du Québec.

The sale has put €245.5 million ($320.7 million at this morning’s exchange rate) back in the company’s coffers.
After – PSA said it will sell at least 50 percent of its profitable Gefco trucking unit for about 1.5 billion euros ($1.98 billion). In addition – Peugeot sold 1 billion euros in new stock to existing shareholders this year and plans to sell 1.5 billion euros in other asset to raise cash and lower its debt load.

But this was not anothf because the overcapacity problem was still there. So PSA said it will close the Aulnay plant near Paris. This means at least 8,000 employees will lose their jobs. But the company already announced at the begging of the year that will fire 6,000 – so we are talking about a total of 14,000 jobs. Many of these jobs would come from closing the Aulnay factory in 2014, but the rest would come from other PSA factories (1400 from the Rennes plant).

The company claims that the cuts will reduce manufacturing costs by €200 to €250 per car.

PSA value
Standard & Poor’s said the company is “burning substantial cash flow” with little prospect of reaching credit ratios in the coming 18 months commensurate with its previous ratings.
Peugeot has been burning through 200 million euros in cash monthly for the last year, the automaker said this month.
Last month PSA said it lost $993 million in the first half of 2012 alone.
The Paris-based automaker’s share price has plummeted nearly 65 percent over the past 12 months and currently trades around 6.7 euros.

That’s huge! “Peugeot has the poorest weight in the CAC 40 stock market index and is clearly at risk,” Exane BNP Paribas analyst Christophe Wakim wrote in a note on Monday.

“Unless there is an exceptional ‘politically driven’ decision, Peugeot is at high risk of being deleted from the CAC 40 in September.”