Peugeot Citroen to allow GM takeover due to financial troubles
Reports suggest that the founding family of PSA Peugeot Citroen is running out of cash and could step back to let US-owned GM take over the ailing business. Sources have already warned that PSA could get close to not having enough free cash to run the business by the end of 2013, having burned 3 billion euros in operating cash last year. GM, which operates Vauxhall, Opel and Chevrolet in Europe, already owns 7% of PSA having invested in March 2012.
Both GM and PSA are suffering from over-capacity, in spite of plans to scale back production. A report from news agency Reuters suggests that if GM were to take control of PSA, it would want to shut down factories and make redundancies in France and Germany, something that would be especially unpopular with French president Francois Hollande.
Peugeot is reported to have sought finance for the business elsewhere, but a lack of willing bidders has forced it to turn to GM, which owns seven percent of the current business. The move was made with the support of current PSA Chief Executive Phiippe Varin.
The Peugeot family initially asked for financial support from Chinese partner Dongfeng, but turned to GM when those talks came to nothing. According to Reuters, GM is ‘playing hardball’ by holding out for assurances that it can cut plants and jobs at a reasonable cost. It’s also reported that any decision is unlikely to be made before the German general election in September.
The Peugeot family has now accepted that they’ll lose control.
Plans are already afoot to produce a range of Peugeot, Citroen, Vauxhall and Opel models with shared engines and platforms, including a new Vauxhall Zafira, Peugeot 3008 and Citroen C3 Picasso.
Overall the Peugeot family owns a 25.4 per cent stake in the company, but controls 38.1 per cent of the voting rights. Peugeot currently employs 77,000 people in France, while sales of Peugeots and Citroens fell 13.9% in the first five months of 2013 versus 2012, slightly worse the GM Europe’s drop of 11.0%. Neither Peugeot nor GM has commented on the story.