VW’s Shareholder Opposes French Gov. Aid to Banque PSA Finance image

VW’s second-largest shareholder, the German state of Lower Saxony, opposes France’s government aid for PSA Peugeot-Citroen’s Banque PSA Finance.

“VW and Lower Saxony see these state loans very critically because they won’t help solve the problems that certain European states have with their automotive industry,” said David McAllister, Lower Saxony’s prime minister and a VW supervisory board member.

Today PSA and the French government discussed a deal according to which automaker’s financial arm, Banque PSA Finance will be offered new loans if Peugeot reduces job cuts and guarantees the future of its plants in the country. The government is ready to offer between 5 and 7 billion euro in financial guarantees for the company, if Peugeot agrees to appoint a government representative and a labor leader to its board.

“It is pretty obvious what would happen,” McAllister said. “We know that the solution to the problems we have in the European automobile industry cannot be state funds.”

PSA really needs the government loans as BPF’s quarterly sales reports, which will be presented this week, will certainly trigger debt rating downgrades. After Moody’s downgraded PSA three months ago, now it is reviewing BPF for a possible downgrade to junk status.