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| Peugeot dynasty ends reign with Dongfeng tie-up |
| Paris, 18.02.2014 |
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| PSA Peugeot Citroen is set to agree a capital tie-up with China's Dongfeng on Tuesday, ending the reign of one of France's oldest industrial dynasties.
PSA Peugeot Citroen is set to agree a capital tie-up with China's Dongfeng on Tuesday, ending the reign of one of France's oldest industrial dynasties.
In the latest buy-in of a Chinese giant to a struggling Western firm, a source said Peugeot's board is to approve an agreement for Dongfeng and the French government to each inject 800 million euros (US$1.1 billion) for 14-per-cent stakes in the company.
The total fundraising effort could bring in nearly 4 billion euros through the sales of additional shares.
The Peugeot family -- which has controlled the firm since its founding in 1810 as a maker of coffee mills and bicycles -- will see its 25-per-cent stake and 38-per-cent voting rights diluted to the same amount as the stakes for the government and Chinese state-controlled Dongfeng.
The deal will come to Peugeot's rescue after the group, Europe's second-largest carmaker, suffered the indignity last year of needing 7.0 billion euros in state-guaranteed refinancing for its credit arm.
Peugeot has been among the hardest hit by a European slump in car sales, suffering a 5.0- billion euro loss in 2012 and cutting thousands of jobs.
For China, where Dongfeng is the second-biggest automaker, the agreement marks the latest high-profile Western acquisition by the economic powerhouse after last month's US$2.91 billion deal by Chinese technology giant Lenovo to buy Motorola from Google.
Under the Peugeot deal, the family will see its number of board seats reduced from four to two and Thierry Peugeot will lose his post as chairman.
None of the three main shareholders would be allowed to increase its stakes for 10 years -- seen as an effort to limit Dongfeng's influence at Peugeot, which employs nearly 90,000 people in France.
The final deal is expected to be signed at the end of next month during a visit by Chinese President Xi Jinping to Paris.
The Peugeot board is also set to agree a deal for a tie-up between its financing arm and Spanish bank Santander for when the state-guaranteed funding expires at the end of 2016.
It is as well expected to approve the appointment of former Renault executive Carlos Tavares as the new CEO to replace Philippe Varin, the man often blamed for guiding the company into its current turmoil.
Last year, a government-ordered enquiry found that Peugeot had made strategic mistakes for years by not seizing fully the opportunities of globalisation.
Peugeot is set to release its results for 2013 early on Wednesday, after it took a series of cost-cutting measures aimed at saving 1.5 billion euros, including closing its iconic Aulnay-sous-Bois factory near Paris.
The company is hoping the tie-up with Dongfeng will give it a boost in China, which is now the group's number two market behind France and where it operates three joint factories.
Dongfeng Motor Corp., founded in 1969 and whose name means "East Wind", sold 3.53 million vehicles in China in 2013, giving it a 16 per cent market share.
Industrial Renewal Minister Arnaud Montebourg said the state's decision to buy in to Peugeot was important to France's economic future.
"We have taken a decision of economic and industrial patriotism, with commitments taken by management," Montebourg said.
He said Peugeot had committed to a goal of producing a million vehicles a year in France by 2016 and investing 1.5 billion euros in French factories.
At Peugeot's historic Sochaux plant in the eastern Franche-Comte region, workers welcomed the financial help but expressed fears the deal would eventually see their jobs relocated to China.
"In the workshops people are saying we are going to be gobbled up by the Chinese," said Christian, 57, one of the factory's 11,500 workers.
"But we don't have any choice, all of the automakers are relying on foreign groups. But if it saves our bacon, that's a good thing."
- AFP/gn
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