BRUCE GAIN

French gov't will be 'decisive' PSA stakeholder

Bruce Gain is an Automotive News Europe correspondent in France.Bruce Gain is an Automotive News Europe correspondent in France.
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The French government doesn't intend to be a silent partner when it takes an expected step to acquire a 14 percent stake in PSA/Peugeot-Citroen.

The government must play a "decisive" role in managing PSA's turnaround, Industry Minister Arnaud Montebourg has been telling the French press.

PSA's survival largely hinges on PSA and Dongfeng becoming equal alliance partners and if France takes a stake in PSA, the government will seek to ensure that happens, Montebourg told Les Echos.

"We want to create a giant with global reach," and "an alliance with Dongfeng will create a relationship of equals while at the same time preserving decision center and r&d outlets in Europe," he said.

PSA and Dongfeng are talking about a deal that would see the Chinese carmaker and French government take matching stakes of 14 percent in cash-strapped PSA through a 3 billion euro ($4.1 billion) share issue. The founding Peugeot family would see its stake cut to 14 percent from 25.5 percent as part of the deal.

Montebourg called on Peugeot family members to end a feud over the planned capital increase. PSA Chairman Thierry Peugeot and his cousin, Robert Peugeot, have clashed over the strategy, with Thierry favoring selling all the new stock on the market without investments by Dongfeng or France, according to reports.

Montebourg said PSA was more than a "family business" and that the interests of PSA as a company should be put first. Current shareholders should end their internal feud and cede control of the company, which he said was "inappropriate," in reference to Peugeot family members.

The French government could use a stake in PSA to prevent production being transferred to China from France. The government has used its 15 percent stake in Renault to exert pressure on PSA's rival to keep production at home.

As Montebourg's comments indicate, PSA is likely about to become a French and Chinese automaker, thus ending the Peugeot family's historical control of the company.

Some industry watchers say this would create a "three-headed monster" with an unwieldy and inefficient management structure.

You can reach Bruce Gain at bgain@crain.com.

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