Peugeot Citroen receives gov’t-backed refinancing

PARIS/FRANKFURT

PSA Peugeot Citroen employees and those of the motor industry clash with police forces in Paris. ABACAPRESS photo

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 automaker said it was close to an agreement with creditor banks on 11.5 billion euros ($14.9 billion) of refinancing and had won state guarantees on 7 billion euros in further borrowing for its Banque PSA Finance.

In return, the automaker agreed to appoint government and union board representatives, halt dividend payments and scrap stock options for its top executives.

“Banque PSA is now government-backed,” Reuters quoted London-based Credit Suisse analyst David Arnold as saying. “It’s becoming increasingly obvious that selling assets won’t stem the cash outflow.”

Europe’s car market has slumped as consumers find their budgets hit by unemployment and government austerity. Peugeot is scrapping more than 10,000 jobs and a domestic plant to stem losses approaching 200 million euros a month, while developing future vehicles with General Motors to deliver more savings in five years’ time.

But its restructuring efforts have proved to be too little, too late to counter the effects of Europe’s brutal auto-market slump.

Reporting a 3.9 percent declined in third-quarter sales, Peugeot warned that net debt would rise to 3 billion euros by year end from 2.4 billion on June 30, as an asset sell-off fails to keep pace with losses.

“The competitive environment is getting tougher, with increased pricing pressure and ongoing deterioration in the markets of southern Europe,” Peugeot said.

Sales fell to 12.93 billion euros in the three months ended Sept. 30 as revenue from the core carmaking division dropped 8.5 percent to 8.52 billion euros.

Meanwhile, Volkswagen, Europe’s biggest carmaker, said yesterday its profits raced ahead by 60 percent in the third quarter on strong demand for its models worldwide, Agence France-Presse reported. VW said in its interim report that net profit amounted to 11.289 billion euros ($14.595 billion) in the period from July to September, an increase of 60.4 percent over the year earlier figure, as sales powered ahead by 26.8 percent to 48.848 billion euros. Separately, Ford Motor plans to close its assembly plant in Genk, Belgium in 2014, union leaders said yesterday after a meeting with local managers.

“The management has decided to close the car assembly and the press activities in Genk at the end of the current production cycle in 2014,” Luc Prenen, ACV union representative, told workers by
megaphone.

 “This will result in the closing of the Genk production site and will cause the loss of 4,300 jobs.”