PARIS -- PSA/Peugeot-Citroen is in exclusive talks to sell 75 percent of its Gefco trucking unit to OAO Russian Railways for about 800 million euros ($1.04 billion), the carmaker said on Thursday.
Under the terms of a sale, Gefco would first pay a special dividend of 100 million euros to PSA as part of the deal, PSA said in a statement.
"Gefco, thanks to this transaction, would further enhance its geographic expansion strategy in China, India and Latin America, and also accelerate its growth in eastern and central Europe, particularly in Russia," the automaker said.
PSA and Gefco plan to consult their works councils on the offer, which is subject to antitrust clearance, PSA added.
PSA announced plans in February to sell assets, including a stake in Gefco, as it grapples with car-industry overcapacity and increasing debt.
Russian Railways CEO Vladimir Yakunin said Tuesday that the bid for Gefco is part of an effort to follow competitors such as Berlin-based Deutsche Bahn AG in establishing a logistics arm alongside train and infrastructure operations.
Underscoring PSA's need for cash, the automaker's debt was lowered to three levels below investment grade by Fitch Ratings on Wednesday. The two other main rating services cut the carmaker's long-term debt two levels below investment grade in July after the manufacturer reported a 662 million euro first-half loss at its automaking unit. PSA said at the time that it got through 200 million euros in cash per month for the last year.
"Peugeot still burns about 100 million euros in cash per month, so this could help them live for about eight months," said Xavier Caroen, a Kepler Capital Markets SA analyst.
The 116-year-old French manufacturer plans to cut 8,000 jobs and close its factory in Aulnay on the outskirts of Paris to reduce costs. PSA issued 1 billion euros in new shares this year to investors and has sold a stake to General Motors Co. to raise cash.
Gefco, founded in 1949 by PSA, reported a 6.7 percent decline in first-half revenue to 1.88 billion euros, while operating profit dropped 56 percent to 63 million euros. Gefco employs 10,300 people in 32 countries, according to its Web site.
GM and PSA announced an agreement on July 2 to transfer the majority of the U.S.-based automaker's logistics business in Europe to Gefco as part of an industrial alliance the two carmakers began setting up in February. In addition to PSA and GM, other Gefco customers include carmakers BMW, Ford Motor Co. and Renault's Dacia brand, as well as cosmetics producer L'Oreal SA and appliance manufacturer Royal Philips Electronics NV, said Pascale Van der Vliet, a spokeswoman at the unit. The automotive industry, including suppliers, accounts for 60 percent of revenue, she said.
Reuters and Bloomberg contributed to this report