PSA/Peugeot-Citroen Seeking Help As Sales Plummet
PARIS (Bloomberg), The French government may buy a stake in PSA/Peugeot-Citroen if it is necessary to save the ailing automaker, a French government minister said last Friday.
“Let’s be clear: this company cannot, must not disappear,” French Budget Minister Jerome Cahuzac said in an interview. “We’ll have to do what we have to do to save this company.” His comments came after PSA announced second-half writedowns of 4.13 billion euros ($5.53 billion) as Europe’s plunging auto sales pushed down the value of its assets. Cahuzac was responding to a report in the daily newspaper Liberation that said the French government is studying taking a PSA stake as an “hypothesis of last resort.”
Other senior government departments played down Cahuzac’s remarks. Buying a holding in PSA is not currently on the agenda, a representative for Prime Minister Jean-Marc Ayrault said. An official at France’s finance ministry said: “The priority for the group is to pursue its recovery plan, to strengthen its alliance with General Motors and to continue its development.”
PSA, whose European deliveries in the region in 2012 dropped 13 percent, expects the market to contract as much as 5 percent in 2013. The automaker is trying to stem losses of some 7 million euros per day. France has already offered the automaker 7 billion euros in bond guarantees. The European Union is currently reviewing the offer to determine whether it’s anti-competitive.
PSA said net debt rose in the second half to 3 billion euros from 2.45 billion euros at the end of June. The automaker reports second-half earnings next week. The writedowns, which are all non-cash, will directly impact PSA’s net income for the half. The writedowns follow guidelines issued by the French securities regulator and do not impact the group’s liquidity, solvency or cash flow targets, PSA said.
The writedowns are more than double PSA’s current market value. PSA shares have plunged 57 percent in the last year, valuing the French carmaker, the largest in Europe after Volkswagen, at 2.08 billion euros. VW’s shares during that time have climbed 25 percent, giving the German company a market capitalization of 79.1 billion euros.
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