PSA wins government rescue as crisis deepens
PARIS -- The French government stepped in to rescue PSA/Peugeot-Citroen by guaranteeing as much as 7 billion euros ($9 billion) in new bonds in exchange for greater influence over the company's strategy.
The state and workers will each receive a seat on the board of directors, and an outside committee will be set up with veto power over any "significant" changes in PSA's operations, the French Finance Ministry said today. PSA will also halt dividend payments and scrap stock options for its top executives.
PSA won 7 billion euros in French government guarantees to shore up its ailing finance arm, Banque PSA Finance. The company said it is close to an agreement with creditor banks on 11.5 billion euros ($14.9 billion) of refinancing.
The refinancing deal will be "finalized in coming days" and comply with European Union rules, Chief Financial Officer Jean-Baptiste de Chatillon said. "It's not state aid, it's state support," de Chatillon said, adding that PSA would pay for the state guarantee. "It's priced at market values.
The German state of Lower Saxony, a major Volkswagen shareholder, has said it would oppose the PSA rescue plan as a possible breach of EU rules.
In addition to the board appointments, French Prime Minister Jean-Marc Ayrault said PSA was expected to trim its planned job cuts in return for the aid.
PSA is scrapping 8,000 jobs and closing its Citroen C3 production plant at Aulnay, near Paris, to stem losses approaching 200 million euros a month.
PSA 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 company's car-loans business.
Third-quarter revenue down 3.9%
PSA today said third-quarter revenue fell 3.9 percent to 12.93 billion euros, compared with a year earlier. Revenue for the automotive division declined by 8.5 percent to 8.52 billion euros because of contractions in the European and Latin American markets and the suspension of CKD deliveries to Iran, the company said.
Global vehicle sales were down 6.3 percent to 625,267.
New vehicle inventory fell by 20,000 units to 471,000 at the end of September.
The company said net debt at the end of 2012 will rise to about 3 billion euros, up from its July target of 2.5 billion euros, as the European auto market heads for its biggest drop in 19 years and 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," PSA said.
Morgan Stanley analysts Vikash Patel said the results were disappointing and the automaker's inventory needed to come down.
Credit Suisse analyst David Arnold said: "Banque PSA is now government-backed."
PSA cut its full-year European outlook to predict a 9 percent market decline, worse than the 8 percent contraction forecast last month.
Bloomberg and Reuters contributed to this report