Peugeot gets government rescue as crisis deepens
PSA Peugeot Citroen unveiled a government-backed refinancing deal for its lending arm as the struggling French automaker’s financial position deteriorated further, sending its stock to historic lows.
Europe’s second-biggest automaker said it was close to an agreement with creditor banks on €11.5 billion of refinancing and had won state guarantees on €7 billion in further borrowing by its Banque PSA Finance.
In return, the automaker agreed to appoint government and union board representatives, halt dividend payments and scrap stock-option awards to executives.
With its costly domestic production and high exposure to southern European markets, Peugeot is bearing the brunt of the region’s slump as unemployment and government austerity weigh on consumer spending.
The downturn is hurting other mid-market automakers including Ford Motor Co, which announced the closure of a major assembly plant in Genk, Belgium, as Peugeot was detailing its bailout in Paris.
“Banque PSA is now government-backed,” London-based Credit Suisse analyst David Arnold said. “It’s becoming increasingly obvious that selling assets won’t stem the cash outflow.”
Peugeot stock has plunged 45 per cent this year, contrasting with a 20 per cent gain by the Stoxx Europe 600 autos and parts index.
The company is scrapping more than 10,000 jobs and a domestic plant to stem losses approaching €200 million a month, while developing future vehicles with General Motors to deliver more savings in five years’ time.
But its restructuring efforts have proven to be too little, too late to counter the effects of Europe’s brutal market contraction.
Reporting a 3.9 per cent decline in third-quarter sales, Peugeot warned that net debt would rise to €3 billion by year-end from €2.4 billion on June 30, as an asset sell-off fails to keep pace with losses.
The debt outlook also reflects dimmer prospects for 57.4 per cent-owned parts business Faurecia, which cut its full-year earnings forecast on Monday.
Sales fell to €12.93 billion in the three months ended September 30 as revenue from the core car-making division dropped 8.5 per cent to €8.52 billion.
The automaker cut its full-year European outlook to predict a nine per cent market decline, worse than the eight per cent contraction forecast last month.
Talks with alliance partner General Motors have settled on four joint vehicle programmes, Peugeot said yesterday, outlining plans to pool development of two small cars, a compact crossover and a larger vehicle.
Peugeot turned to the French government after a Moody’s credit rating downgrade earlier this month threatened to relegate the lending division to junk status, hobbling the sales financing business.