Dongfeng to take 30% stake in PSA Peugeot Citro"en?

Wed, 09 Oct 2013

PSA Peugeot Citroën, the European automaking giant responsible for forbidden fruit like the Citroën DS3 and Peugeot RCZ, has been struggling mightily, with a 510-million euro operating loss ($689.2M USD) in the first half of 2013, while cutting over 11,000 jobs and closing a plant, all in a bid to stop hemorrhaging cash. Help could be on the way, though, thanks to one of China's many emergent automakers, Dongfeng.

The company, which currently operates three joint-venture operations with PSA in China, is reportedly looking at taking a 30-percent stake at a cost of $1.63 billion. Dongfeng is in the midst of "preliminary research," according to a report from Automotive News Europe. PSA reps have reportedly declined to comment outside of saying that the company is looking at new projects with different partners.

While this deal does sound like it's in the earliest stages, a tie-up with Dongfeng could be big for PSA, which has had no shortage of trouble outside of the sluggish European market. The arrangement also raises some interesting questions for PSA's two largest shareholders – the Peugeot family and General Motors. Dongfeng would be the largest shareholder in PSA, replacing the Peugeot family, which currently holds a controlling 25.5-percent stake. GM, meanwhile, only owns seven percent, and has previously gone on record as saying the partnership between the two wouldn't be broken. That said, as part of GM's alliance, it reserves the right to end the partnership if control of PSA were to change.

Could Dongfeng be the answer to PSA's struggles? Perhaps, but it probably won't be easy. Fellow struggling European automaker Volvo has been under Chinese ownership – Geely – since exiting the Ford portfolio in 2010, and while showing many promising developments in terms of product and technology since that time, the Swedish safety marque has largely failed to gain sales momentum and management struggles have been reported between Geely and Volvo.

By Brandon Turkus