France has no plans for PSA stake

France has no plans to support ailing carmaker PSA Peugeot Citroen with a stake purchase, a source in the finance ministry said, cooling speculation of a state cash injection to help ease the company's problems.

The comment came a day after PSA, suffering falling sales in a depressed European car market, highlighted the scale of its woes by taking a €4.1 billion writedown on the value of its plant and other automotive assets.

"An equity investment by the state in Peugeot is not on the agenda," the source said on Friday. "The priority for the group is to pursue its recovery plan, to strengthen its alliance with General Motors and to continue its development."

Although the writedown was a non-cash accounting item that does not affect the group's liquidity or solvency, it reflected Europe's worsening market outlook and prompted speculation the state might intervene.

Budget minister Jerome Cahuzac had said earlier France might consider investing in Peugeot, helping send its shares higher.

"It's possible," Mr Cahuzac told BFM Television. "This company must not and cannot disappear and we must do what it takes for this company to survive." The stock reversed most of its initial gain and was up 0.2 per cent at €5.88 by 11.16 GMT.

Reuters