PSA takes $5.53 billion in writedowns as auto sales plummet
PARIS (Bloomberg) -- PSA/Peugeot-Citroen took second-half writedowns of 4.13 billion euros ($5.53 billion), reflecting the falling value of assets as the region's auto sales sink a sixth straight year.
"This calculus results from cautious assumptions about the European economic environment," Chief Financial Officer Jean- Baptiste de Chatillon told reporters in Paris on Thursday. "We think that this European car market will remain affected by the crisis for a long time."
PSA is writing down the automotive division's property, plants and other assets, which were valued at 14.5 billion euros at the end of June, by 3.89 billion euros. The automaker is also taking a second-half charge of 243 million euros for what it called "onerous contracts."
The writedowns are more than double PSA's current market value.
Auto sales in the European Union slumped the most in 19 years in 2012 and auto executives are forecasting a further decline for this year. PSA, whose deliveries in the region in 2012 dropped 13 percent, expects the market to contract as much as 5 percent in 2013, Chatillon said.
PSA in response aims to cut 17 percent of its French workforce and close a factory on the outskirts of Paris. Automakers have announced more than 30,000 job cuts in Europe since the beginning of July in response to the prolonged slump.
The writedowns, which are all non-cash, will directly impact PSA's net income for the half. The writedowns follow guidelines issued by the French securities regulator and do not impact the group's liquidity, solvency or cash flow targets, PSA said.
The automaker is struggling to reduce losses, which a union leader at the carmaker said last week are 7 million euros per day. PSA said on Thursday that net debt rose in the second half to 3 billion euros from 2.45 billion euros at the end of June. The automaker reports second-half earnings next week.
PSA shares have plunged 57 percent in the last year, valuing the French carmaker, the largest in Europe after Volkswagen, at just 2.08 billion euros. VW's shares during that time have climbed 25 percent, giving the German company a market capitalization of 79.1 billion euros.
PSA has sold assets in the last year to raise cash, and entered into a strategic alliance with General Motors Co. that is meant to generate $2 billion for the partners in annual cost savings and sales improvements within 5 years.
The French government has also offered the automaker 7 billion euros in bond guarantees. The European Union is currently reviewing the government offer to determine whether its anti-competitive.
PSA's plan to eliminate 11,200 jobs and close a factory in Aulnay are on hold after a Paris court said last month that the automaker can't cut the positions until Faurecia, 57 percent-owned by PSA, informs its workers about the impact of the carmaker's restructuring.
Faurecia is itself slashing 3,000 jobs in its home region by the end of this year. French workers are shielded by labor laws requiring employers to take extensive steps to ensure employees are regularly and fully informed about job-cut proposals
Europe's car market is forecast to drop to 12.3 million vehicles this year, 23 percent below the pre-crisis peak, IHS Automotive estimates. GM is closing a German factory and Ford Motor Co. is shutting three plants across Europe in response.Contact Automotive News