Paris, France - Troubled Peugeot appears to have a lifeline on the cards.

Sources close to the matter have said that PSA Peugeot Citroën has reached an outline deal with Dongfeng and France to raise up to 4 billion euros (R60 billion) in fresh capital and deepen cooperation with the Chinese carmaker.

The agreement is set to be presented to the Peugeot board on February 18 and likely signed as a non-binding memorandum of understanding on the same day, according to those aforementioned sources.


Peugeot, battered by Europe's prolonged vehicle demand slump and sustained by 7 billion euros (R105 billion) of state guarantees, needs a cash infusion to stay afloat.

The planned share sale to Dongfeng and the French government may be its last survival hope after the failure of earlier deal talks with General Motors.

The accompanying industrial plan would see Peugeot and Dongfeng retain and expand their existing joint venture, increasing research and development cooperation with a view to expanding into South East Asian markets.

Peugeot has been in talks with Dongfeng for months over a rescue plan that would see the Chinese carmaker and French government take matching stakes of about 14 percent each.


With most details now agreed - including a heavily discounted 7.50 euro issue price for the two new shareholders - the choice of a new independent chairman is the main outstanding point to be resolved, several sources said.

The French government is pushing Louis Gallois, a senior civil servant who joined the Peugeot board on a nominally independent ticket as a condition of the existing state guarantee in place since 2012, the sources said.

But Dongfeng is resisting his nomination and rooting instead for prominent French businesswoman Patricia Barbizet, another independent Peugeot director.

A spokeswoman for Barbizet did not immediately return calls seeking comment. Peugeot declined to comment on the deal talks with Dongfeng.

Zhou Mi, a spokesman for the Wuhan, China-based Dongfeng, said he was not aware of any agreement so far. He said the company would make a public announcement if any deal was reached.