Peugeot family cedes control in rescue deal with China's Dongfeng

Thu, 20 Feb 2014

PSA Peugeot-Citroën may have been saved from the brink of collapse. It has finally completed a deal where Chinese automaker Dongfeng and the French government are each investing about 800-million euros ($1.1 billion USD) to take 14 percent stakes in the automaker, according to the BBC. The deal dilutes the Peugeot family's stake from 25.4 percent to 14 percent. In addition to that, it is raising another 1.4 billion euros ($1.9 billion) from existing PSA investors. The deal still must be approved by shareholders, but is expected to pass.

The deal's announcement comes at the same time that PSA has announced its 2013 financial results. It posted a 2.32-billion euro ($3.2 billion) loss last year, which can be considered a substantial improvement compared to the 5-billion euro ($6.9 billion) loss in 2012. Sales were down 2.4 percent last year.

The Dongfeng deal has been rumored since last year, and the two companies are already linked, as Dongfeng runs a PSA joint-venture factory in China. The French government is promising to use its stake to protect Peugeot workers in France when it becomes a shareholder.

The Peugeot family founded the company in 1810 as a manufacturing business and eventually diversified into making bicycles and cars. The company has been volatile in recent years, with General Motors buying seven percent of PSA in 2012 and selling the stock at a loss less than two years later. It is also the first time in its history that the family has not had a controlling stake in the company that bears its name.

While it's bad for the family, the deal could be great news for PSA. It has a talented new CEO and a massive cash injection to get things started toward progress. This is the company's second chance.

By Chris Bruce