Paris, France - PSA Peugeot Citroen plans to build new cars and expand in Asia under a French-backed rescue deal agreed with China's Dongfeng, the carmaker announced on Wednesday, as it posted a $3.2 billion (R34.5 billion) loss that underscores the scale of the task ahead.
The Paris-based group announced a long-awaited 3 billion euro (R45 billion) fundraising that will bring it new leadership, more time to turn itself around and an end to two centuries of family control.
Dongfeng Motor Group and the French state will each pay 800 million euros for 14 percent of the carmaker to match the founding Peugeot family's reduced holding, Peugeot said.
“The improving situation in Europe is starting to affect the company,” said ISI Group analyst Erich Hauser, adding he was “surprised by how much better the performance at PSA was in the second half” of last year.
But Peugeot said it still made a 2.32 billion euro (R34.8 billion) net loss, and warned it may not stem the red ink until 2016, a year later than initially promised.
Peugeot has been one of the biggest casualties of a six-year slump in Europe's car market, with insiders saying it has been too slow for years to adapt to competitive threats and had missed opportunities to deepen partnerships with BMW, Toyota and Mitsubishi.
Chief Financial Officer Jean-Baptiste de Chatillon said Peugeot would use its new capital to catch up in hybrid technology, low-cost cars and Mediterranean markets where it has been left behind by French rival Renault-Nissan.
“Everything is in place to give Peugeot a new lease of life as a major international carmaker,” Chatillon said. “We have the products, the teams, the know-how and now we have a new balanced and stable ownership.”
Incoming CEO Carlos Tavares said there was still “huge room for improvement” on costs.
“Our challenge is to be the best of the Europeans in terms of (our) manufacturing and distribution model, which frankly is not the case today,” he told analysts and reporters.
Under their framework deal, Peugeot and Dongfeng pledged to expand their existing joint venture, adding new models to target 1.5 million annual vehicle sales in 2020, and generate 400 million euros of savings for the French partner.
Dongfeng-Peugeot will also create a major new research and development centre in China and a sales venture to export their cars to other South East Asian markets, the companies said.
END OF AN ERA
The deal marks the end of an era, with Chairman Thierry Peugeot and CEO Philippe Varin both stepping down. Former Renault No.2 Tavares, whose appointment was announced in December, took over the operational leadership on Wednesday.
Dongfeng, France and the Peugeot family will each have two board seats, according to a summary of their shareholder agreement published by the Chinese carmaker. The Peugeot board is “expected to be chaired by an independent member”, it said.
But in a sign of potential governance headaches arising from the new “three-headed” ownership, France made clear there was no consensus on the nomination as it pushes senior civil servant Louis Gallois as its own candidate.
“There will be a discussion between the shareholders,” Industry Minister Arnaud Montebourg said, adding it was “too early to say” whether the chairman would be independent.