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Can China save Peugeot?

Thursday, December 12, 2013 - 01:42

Dec 12 - French automaker PSA Peugeot Citroen has unveiled a 1.1 billion euro ($1.52 billion) writedown at its ailing overseas operations and won General Motors backing for a tie-up with China's Dongfeng. Sonia Legg looks at whether the plan will revive its fortunes

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It's already cutting jobs and plants, now PSA Peugeot Citroen is banking on a 1.1.billion euro writedown to help it stay afloat. It applies to overseas operations only but highlights the seriousness of the crisis facing the French automaker. It's been hit harder than most by the downturn in the European car market. A significant Chinese tie-up - alongside state intervention - could well be the next move. General Motors - which holds 7% of Peugeot - has agreed to let the group pursue a closer relationship with Dongfeng - its current partner in China. George Hay is from Reuters Breakingviews. (SOUNDBITE) (English) GEORGE HAY, COLUMNIST, BREAKINGVIEWS, SAYING: "The main thing that will change is that Dongfeng will become a majority shareholder rather than the Peugeot family so it will be in their interest to change so you can definitely say that is a plus." But Peugeot shares plunged as much at 10 percent after the announcement, perhaps because there are no guarantees the China deal will come to fruition. (SOUNDBITE) (English) GEORGE HAY, COLUMNIST, BREAKINGVIEWS, SAYING: "DongFeng money and the French state money is pretty much the only game in town. As for whether that actually sorts them out - there are general problems for European car makers, it's not a definite." Peugeot's manufacturing division recorded a 510 million euro operating loss in the first half. And that followed a 4.7 billion euro hit on earnings in 2012. Weaker currencies and poor sales outlooks in Russia and Latin America were partly to blame. But Peugeot is sticking to its promise to improve its cash flow from minus three 3 billion euros to around 1.5 billion. Even when the wider economy in France at the moment isn't helping.

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Can China save Peugeot?

Thursday, December 12, 2013 - 01:42