Peugeot gets state rescue as crisis deepens

 
City A.M. Reporter
PSA PEUGEOT Citroen yesterday unveiled a government-backed refinancing deal for its lending arm as the struggling French automaker’s financial position deteriorated further, sending its stock to historic lows.

Europe’s second-biggest automaker said it was close to an agreement with creditor banks on €11.5bn (£9.2bn) of refinancing and had won state guarantees on €7bn in further borrowing by its Banque PSA Finance.

In return, the automaker agreed to appoint government and union board representatives, halt dividend payments and scrap stock-option awards to executives.

With its costly domestic production and high exposure to southern European markets, Peugeot is bearing the brunt of the region’s slump as unemployment and government austerity weigh on consumer spending.

The downturn is hurting other mid-market automakers including Ford Motors, which yesterday announced the closure of a major assembly plant in Genk, Belgium, as Peugeot was detailing its bailout in Paris.

Reporting a 3.9 per cent decline in third-quarter sales, Peugeot warned that net debt would rise to €3bn by year-end from €2.4bn on 30 June, as an asset sell-off fails to keep pace with losses.

It also cut its full-year European outlook to predict a nine per cent market decline, worse than the eight percent contraction forecast last month.