The Telegraph
Thursday , February 20 , 2014
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Peugeot gets lifeline

Cash push

Paris, Feb. 19 (Agencies): Chinese investors and French taxpayers have agreed to offer a bailout package of 3 billion euro ($4.1 billion) to loss-making car manufacturer PSA Peugeot Citroen.

Chinese car maker Dongfeng and the French government will invest 800 million euros ($1.1 billion) each in Peugeot to pick up an equal 14 per cent stakes. The Peugeot family will hold another 14 per cent. A share offering, in which the stakeholders can buy three new shares for each 10 held by them, is expected to fetch more money.

Peugeot, which has suffered a $3.2-billion loss (2.32-billion euro), plans to build new cars and expand in Asia.

The fundraising will bring the company new leadership, give it more time to turn itself around and put an end to two centuries of family control.

Peugeot shares jumped as much as 9 per cent after it unveiled new goals for the partnership with Dongfeng and said it had slashed cash burn last year, beating an interim recovery goal.

“The improving situation in Europe is starting to affect the company,” said ISI Group analyst Erich Hauser, adding he was “surprised by how much better the performance at PSA was in the second half” of last year. However, Peugeot said it might not stem the red ink until 2016, a year later than initially promised.

Peugeot has been one of the biggest casualties of a six-year slump in Europe’s car market, with insiders saying it has been too slow to adapt to competitive threats and had missed opportunities to deepen partnerships with BMW, Toyota and Mitsubishi Motors

CFO Jean-Baptiste de Chatillon said Peugeot would use the new capital to catch up in hybrid technology, low-cost cars and Mediterranean markets where it had been left behind by French rival Renault-Nissan.