PSA-Dongfeng deal seen as necessary, but skepticism remains
'Industrial patriotism' led France to take stake in automaker, minister says
PARIS -- PSA/Peugeot-Citroen's capital tie-up with China's Dongfeng Motor and the French government may not bring stability to the struggling automaker, observers said.
The financial newspaper Les Echos described the deal as "the dragon that came to the rescue of the lion. The lion isn't dead, but it has radically changed its appearance."
Bernard Jullien, director of the GERPISA car industry research network, told the newspaper that the PSA-Dongfeng alliance will be a partnership without precedent and warned that the stockholder triangle involving PSA, Dongfeng and the French state could create instability.
PSA on Wednesday unveiled a 3 billion euro ($4.1 billion) capital increase in which Dongfeng and the French state will each pay 800 million euros for 14 percent of the carmaker. The founding Peugeot family's holding will fall to 14 percent from its current 25 percent stake and 38 percent of voting rights, short of the one-third required to veto decisions.
In an interview on radio station France Inter, Arnaud Montebourg, minister of industrial renewal, defended the deal, saying it will permit PSA and Dongfeng to play to their strengths. "PSA is a company with the technology, the marques, but has not been able to grow in Asia, while Dongfeng doesn't have the technology or the marques, but has the growth in Asia," he said.
Montebourg defended the government's investment in PSA. "We have taken the decision of economic and industrial patriotism," he said.
Gilles Carrez, chairman of the National Assembly's finance committee, told radio station Europe 1 that PSA "had no choice" but to make the deal with Dongfeng because the company "did not know how to operate globally.''
Meanwhile, the Financial Times newspaper said, "Now, the question remains over how successfully the group can execute its plan under the aegis of new chief executive Carlos Tavares." It added: "The new chief executive will have to manage potentially conflicting forces in the board room, with likely two seats each going to Beijing, the Elysee Palace and the divided Peugeot family."