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Paris - 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 €11.5bn of refinancing and had won state
guarantees on €7bn 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,” London-based Credit
Suisse analyst David Arnold said. “It’s becoming increasingly obvious that
selling assets won’t stem the cash outflow.”
Peugeot shares were down 6.5% at €5.45 as of 08:01 GMT,
touching their lowest levels 1986. The stock has plunged 48% this year,
contrasting with a 20% gain by the Stoxx Europe 600 autos & parts index.
Europe's car market as slumped as consumers find their
budgets hit by unemployment and government austerity. The Peugeot rescue
coincides with the news that Ford Motor will close a factory in Belgium
employing 4 300 workers as it tries to stem losses in the region.
Peugeot is scrapping more than 10 000 jobs and a domestic
plant to stem losses approaching €200m 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% declined in third-quarter sales, Peugeot
warned that net debt would rise to €3bn by year end from €2.4bn on June 30, as
an asset sell-off fails to keep pace with losses.
The debt outlook also reflects dimmer prospects for
57.4%-owned parts business Faurecia, which cut its full year earnings forecast
on Monday.
“The competitive environment is getting tougher, with
increased pricing pressure and ongoing deterioration in the markets of southern
Europe,” Peugeot said.
Sales fell to €12.93bn in the three months ended September
30 as revenue from the core carmaking division dropped 8.5% to €8.52bn.
The automaker cut its full-year European outlook to predict
a 9% market decline, worse than the 8% contraction forecast last month.
Talks with new alliance partner General Motors have settled
on four joint vehicle programmes, Peugeot said on Wednesday, outlining plans for
joint development of two small cars, a compact crossover and a larger vehicle.
Peugeot turned to the French government after a Moody’s credit rating downgrade earlier this month threatened to relegate the lending division to junk status, hobbling the sales financing business.
The refinancing deal will be “finalised in coming days” and
comply with European Union rules, Chief Financial Officer Jean-Baptiste de
Chatillon told reporters and analysts on Wednesday.
“It’s not state aid, it’s state support,” de Chatillon said,
adding that Peugeot would pay for the state guarantee. “It’s priced at market
values.”
In addition to the board appointments, French Prime Minister
Jean-Marc Ayrault said Peugeot was expected to trim its planned job cuts in
return for the aid.
“The government has no intention of handing out gifts like
this without return commitments,” Ayrault said on France Inter radio.
The German state of Lower Saxony, a major Volkswagen
shareholder, has said it would oppose the Peugeot rescue plan as a possible
breach of EU rules.
Brussels has not yet been informed of any bailout agreement
and cannot comment on the specifics of the case, a European Commission
spokesman said on Tuesday.
In a separate statement on Wednesday, Peugeot said its board had agreed to refrain from proposing dividends, buying back shares or issuing stock options to executives as long as the company’s debt benefits from state guarantees.
