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Published on June 28th, 2011 | by Daniel Sherman Fernandez


Peugeot to trail VW as the French Government tries to save jobs

Peugeot may fall further behind most European competitors as the carmaker bows to French government pressure to protect jobs ahead of next year’s presidential election. PSA CEO Philippe Varin distanced himself from a leaked proposal to close a French plant after the government described it as “unacceptable. The overt influence comes as Peugeot loses marginal market share in Europe and lags further behind Volkswagen in profitability.
“The problem is that the government takes a shorter-term view than many hedge funds,” said Arndt Ellinghorst, an analyst at Credit Suisse in London. “The market’s low valuation of the French car industry is clearly related to the government’s impact.”

Peugeot has a market capitalization of 6.87 billion euros. VW has advanced 8.7 percent in the same period and is worth 58.00 billion euros. Peugeot’s European market share has shrunk to 13 percent through the end of May from 13.8 a year earlier, according to industry association ACEA, while VW has gained to 22.8 percent from 21.1 percent.
VW last year posted 6.85 billion euros in net income, compared with Peugeot’s 1.13 billion euros. Peugeot trail because they depend more heavily on sales of smaller, cheaper models than VW, while facing similar hourly industrial labor costs at their domestic plants, Eurostat data shows.

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