France’s government could participate in a capital hike at PSA Peugeot Citroen SA (EPA:UG) if needed, in an effort to help the carmaker limit its increasing losses, daily Liberation cited on Friday an unnamed government source as saying.
A state move to take a stake in Peugeot would be made only as a last resort plan, in case Peugeot could find no other way of dealing with the losses, the source told the paper, without giving any details.
The carmaker on Thursday cut the book value of its plants and other assets by 28%, adding EUR4.13bn (USD5.5bn) to its net loss for 2012.
The government said in October 2012 it was willing to provide state loan guarantees in the amount of EUR7bn to Peugeot’s financial unit Banque PSA Finance.
Peugeot did not wish to comment when contacted by Reuters.
French carmaker PSA Peugeot Citroen (EPA:UG) said it plans to terminate its French joint venture Sevelnord with Italian partner Fiat SpA (BIT:F) and presented a project agreement to that effect to the venture’s works council.
According to the terms of the tentative deal, Peugeot will take over Fiat’s stake in the JV by 31 December 2012. Fiat and Peugeot hope to settle the terms of a definitive agreement for Sevelnord before the end of this year, the French group said.
The move follows the announcement made by the companies last May that they would not continue their cooperation beyond 2017.
The project agreement stipulates that Sevelnord would go on producing light commercial vehicles for both partners until Euro6 emission standards take effect at the end of 2016, Peugeot said, adding that all other cooperation arrangements with Fiat Group Automobiles (FGA) remain in place, including their Italian joint venture Sevel, located in Val di Sangro.
The Sevelnord venture assembles the Peugeot Expert, Citroen Jumpy and Fiat Scudo commercial vans. Its formation as Societe Europeenne de Vehicules Legers du Nord (Sevelnord) was agreed by the two partners in 1988 and the plant rolled out the first models Citroen Evasion, Fiat Ulysse, Lancia Zeta and Peugeot 806 in 1993, according to its website.
In May, its employees were asked to accept a number of concessions, including salary freeze and the reduction of hundreds of jobs among others, in order to avoid a closure of the plant, Reuters said. Unions expressed concerns that Peugeot could increase the number of jobs it would cut to 10,000 from 6,000 which it planned to reduce as part of a programme to achieve cost savings of €1bn ($1.2bn), the news agency said.
The carmaker announced last week a 13% decline in global light vehicles sales for the first half of 2012.
Outside of Europe, automaker Peugeot-Citroen has never been a major player. The French company has remained a major influence in Europe’s small and mid-sized car industry, releasing a large string of highly successful models every generation. However, with hot competition from Japanese motor vehicle companies and a lengthy list of regulations to cater to, the company is rarely seen in Asia.
However, the large auto company now has Chinese growth to thank for its success. Peugeot-Citroen sales steadily increased over the past year due to greater Chinese demand, particularly in the major economic centres of the country’s East Coast. On the back of greater demand in China and various other markets in Asia, the company has announced plans to sell half its cars in the region by 2015.
This marks the largest venture outside of Europe in the company’s history. Unlike the German and British automotive industries, which have typically survived on international demand, France’s big motoring companies have primarily operated within Europe. The company announced a partnership with China’s Dongfeng Motors in order to build an alliance within the country.
Revenue for the company has increased alongside the greater sales, growing by 21% over the last quarter and expected to grow further following European economic recovery. Vehicle sales have slumped within major Western markets due to the financial crisis, which has highlighted the value of Eastern markets to the world’s major automotive manufacturers.
With Chinese businesses continuing to expand and the country’s large middle class gaining access to disposable income, the automotive world is taking notice. Malaysian company Proton Auto has announced plans to export more cars to mainland China. A number of Japan’s major auto companies also plan to build factories within China as sales improve and the country’s regulations loosen.