PSA denies seeking gov't loan as first-half car sales tumble
Traditionally strong European markets are in 'profound crisis'
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PSA denied that it is seeking a loan from the French government, as the company announced that its global first-half vehicle sales tumbled 13 percent after Europe's debt crisis hit demand.
Philippe Bonnin, the mayor of Chartre de Bretagne, where a PSA factory employs 5,800 people, told Bloomberg today that the automaker is seeking an emergency government loan.
Bonnin had earlier told La Tribune newspaper that the government should demand a stake in PSA in return for a loan.
PSA spokesman Jean-Baptiste Mounier denied that the carmaker is in talks about a loan, adding that the company regularly talks to the government about other subjects.
PSA said its first-half global sales fell to 1.62 million vehicles in the first six months, from 1.86 million in the same period a year earlier. "The Peugeot and Citroen brands' traditionally strong markets, France, Spain and Italy, are in profound crisis," the company said.
PSA said its car and light commercial vehicle sales in Europe fell by 13.6 percent to 994,000 units compared with a 7 percent decline in the total market, giving the company a 12.9 percent market compared with 13.9 percent in first-half of 2011.
PSA also lost ground in Latin America where first-half deliveries dropped 21 percent to 122,000 vehicles in a broadly flat market, hurt by an increase in Brazilian vehicle import taxes.
PSA's sales rose 7.1 percent and 17 percent respectively in China and Russia, where the automaker is adding production capacity to expand from a low base.
The automaker is heavily exposed to European markets and is seeking to reduce its dependence on the region by aiming to sell more than half its vehicles outside Europe by 2015, compared with around 35 percent now.
Recent model launches such as the Peugeot 208 and Citroen DS5 upscale sedan have given the group ammunition to successfully expand overseas, brands chief Frederic Saint-Geours said. "In a very tight automotive market environment in Europe, our strategy of moving up-market and globalizing our operations is proving to be more relevant than ever," he said in a statement.
Worse second half
Erich Hauser, a London-based Credit Suisse analyst, said: "The first half was very, very bad, and I see no reason why the second half would be any better. The situation in Europe will only get worse as we go forward."
While direct government intervention would buy PSA more time, it would also make cutting jobs more difficult, Hauser added.
PSA is preparing a new round of cuts and a likely plant closures. The cuts are expected to include thousands of job losses and the possible closure of its Aulnay plant near Paris, in addition to measures announced earlier this year under a 1 billion euro ($1.2 billion) savings program.
Varin is scheduled to brief staff representatives on the cuts at a works council meeting next week, ahead of the company's first-half results presentation on July 25.
Reuters and Bloomberg contributed to this report
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