Peugeot confirms talks with Chinese automaker

PARIS - Agence France-Presse

A tie-up with Dongfeng would give Peugeot a much-needed cash injection, and also cement its relationship with China’s second-biggest carmaker. REUTERS photo

Peugeot has confirmed 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, said on Dec. 12 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.

Taking a Peugeot stake

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 3.5 billion euros ($4.8 billion).

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.

“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.