PSA Peugeot unveils state-backed rescue
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 car firm 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, which announced the closure of a major assembly plant in Genk, Belgium, as Peugeot was detailing its bailout in Paris.
Peugeot shares were down 4.7 per cent at €5.55 at lunchtime yesterday after touching their lowest levels since 1986. The 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 cutting 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 30th, 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 30th as revenue from the core carmaking division dropped 8.5 per cent to €8.52 billion. – (Reuters)