A flag with the company logo outside a Peugeot automobile dealer in Paris yesterday.
PARIS: Peugeot confirmed yesterday it is in talks with Chinese giant Dongfeng about a shareholder tie-up, while GM announced it was dropping its 7 percent stake in the loss-making French carmaker.
PSA Peugeot Citroen, the second-biggest carmaker in Europe after Volkswagen of Germany, stressed that there had not been any agreement on a tie-up and that the talks were at a preliminary stage, but GM’s statement said Peugeot no longer needed its support.
A tie-up with Dongfeng would give Peugeot a much-needed cash injection, and also cement its relationship with China’s second-biggest carmaker and boost its access to the fast-growing market.
Dongfeng, for its part, has only said that it is studying the rationality of taking a stake in Peugeot.
A source familiar with the talks said the amount of the capital injection being considered is ¤3.5bn ($4.8bn). The most probable scenario would involve Dongfeng and the French state in equal measure buying up a majority of the newly-issued shares, with other French investors taking the rest, said the source.
As the European car market and its sales remain stuck in a slump, Peugeot has moved to revamp its management and there has been talk of a major shake-up in the ownership of the company.
Reports in recent months have hinted at a sharp reduction in the holding of the Peugeot family, which controls about a quarter of the shares and 38.1 percent of the voting rights, losing its controlling interest.
Peugeot will “remain French”, Industrial Renewal Minster Arnaud Montebourg said on the reports of the Dongfeng talks. The Prime Minister’s office said it was following the talks “very closely”.
In a surprise move US carmaker General Motors announced Thursday it is selling its entire 7 percent stake in Peugeot.
GM explained the move by saying its equity support was no longer needed, but a capital injection would also dilute its holding and value. “Our equity stake was planned to support PSA in their efforts to raise capital at the time of the creation of the GM and PSA alliance, and that support is no longer needed,” said GM Vice Chairman Steve Girsky.
The alliance, which dates to March 2012, aimed to improve both companies’ positions in Europe after the regional market plunged into a deep slump, weakening many major automakers there, including GM’s loss-making German unit Opel.
The two have been laying plans to achieve savings by pooling purchases of parts and jointly developing new auto platforms.