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Peugeot ties up deal with Dongfeng after loss
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PSA Peugeot Citroen plans to build new cars and expand in Asia under a French-backed rescue deal agreed with China’s Dongfeng, the carmaker said yesterday, as it posted a US$3.2 billion loss that underscores the scale of the task ahead.
The Paris-based group unveiled a long-awaited 3-billion-euro (US$4.1 billion) fundraising that will bring it new leadership, more time to turn itself around and an end to two centuries of family control.
Dongfeng Motor Group and the French state will each pay 800 million euros for 14 percent of the carmaker to match the founding Peugeot family’s reduced holding, Peugeot said.
Peugeot shares jumped as much as 9 percent 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 that he was “surprised by how much better the performance at PSA was in the second half” of last year.
But Peugeot said it still made a 2.32-billion-euro net loss, and warned it may 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 for years to adapt to competitive threats and had missed opportunities to deepen partnerships with BMW, Toyota and Mitsubishi Motors.
Chief Financial Officer Jean-Baptiste de Chatillon said Peugeot would use its new capital to catch up in hybrid technology, low-cost cars and Mediterranean markets where it has been left behind by French rival Renault-Nissan.
“Everything is in place to give Peugeot a new lease of life as a major international carmaker,” Chatillon said. “We have the products, the teams, the know-how and now we have a new balanced and stable ownership.”
Incoming CEO Carlos Tavares said there was still “huge room for improvement” on costs.
“Our challenge is to be the best of the Europeans in terms of (our) manufacturing and distribution model, which frankly is not the case today,” he said.
While the loss at Peugeot’s core auto division narrowed 30 percent to 1.04 billion euros last year, net debt rose by about the same figure to 4.15 billion euros despite drastic investment cuts.
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