PARIS (Bloomberg) – As PSA/Peugeot-Citroen uses up 200 million euros ($260 million) in cash every month, the family that founded the automaker and can determine its fate is getting better returns from alternative investments.
The Peugeot family's acquisition of 7 percent of Orpea, which operates assisted-living facilities, is part of a diversification strategy that has reduced the automaker's share of assets in the family's listed holding company to 35 percent from more than 90 percent in 2000.
Signs that the family is wavering in its commitment complicates PSA's efforts to reverse deepening losses that pushed its shares this year to a 23-year low.
The shift coincides with clashes between the family over its role at the carmaker, including Thierry Peugeot blocking his cousin Robert's effort to take an executive post at the automaker in 2006, two people familiar with the matter said.
"As the number of descendants keeps growing, some of the younger ones may become less involved in the car business and may be tempted to leave the ship if it isn't profitable enough," said Bernard Jullien, an industrial economist with French automotive think-tank Gerpisa. "Peugeot managers are not given enough leeway to lead the company."
PSA is Europe's second-largest carmaker after Volkswagen. The Paris-based company lost 662 million euros ($860 million) at its automotive operations in the first half.
PSA has been hard hit by the eurozone crisis, which has caused car sales to slump in its stronghold of southern Europe. The automaker has been slow to expand outside Europe, which accounted for 76 percent of revenue last year, compared with 65 percent at VW.
To bolster its balance sheet, PSA this year issued 1 billion euros in new shares and sold assets including its 48-year-old Paris headquarters. On Thursday, the company agreed to sell a 75 percent stake in its Gefco trucking unit to Russian Railways for 800 million euros and a special dividend of 100 million euros.
Having rebuffed previous partnership offers, PSA agreed in February to cooperate with General Motors Co., making the U.S. automaker its second-largest shareholder after the Peugeot family.
With the automaker faltering, Robert Peugeot has focused on running the family's FFP holding company, still the carmaker's biggest shareholder, and has diversified assets with purchases such as the Orpea stake, household appliance maker Groupe SEB and marketing services company DKSH.
The holding company has benefited from those moves. FFP's stock, traded in Paris, is off by just 3.3 percent this year, with holdings like Orpea, which has gained 22 percent, offsetting the 35 percent decline in the shares of the automaker.
The Peugeot family currently owns 25.4 percent of the company's shares through FFP and Etablissements Peugeot Freres, another holding company that in turn controls FFP.
All told, the family controls 38.1 percent of PSA's voting rights, which means they can block decisions requiring shareholder approval. Five family members are on the automaker's 14-seat supervisory board. Thierry Peugeot, the carmaker's chairman, declined to comment for this story.