Peugeot Citroën announces part-sale to Chinese Dongfeng, with new cash injection to boost sales and profitability
Darren Moss
19 February 2014

PSA Peugeot Citroën has announced its part-sale to Dongfeng, with the Chinese manufacturer paying around €800 million (£658 million) for a 14 per cent share in the troubled car maker.

The French state will match Dongfeng's stake in PSA, making up for the reduced share now held by the Peugeot family, which had controlled the company since founding it in 1810.

Peugeot and Dongfeng have set targets to sell 1.5 million vehicles per year from 2020, mainly in China and Asia. A new joint research and development centre will be built in China to focus on developing new technologies for emerging markets as part of the deal. Among that technology is believed to be a new small-car platform.

The company also revealed a new capital tie-up with Dongfeng worth €3 billion (£2.5 billion), which will be used to buy time for PSA to recover following another round of poor financial results in 2013.

PSA's financial results, released today, show that group revenues dropped by 2.4 per cent in 2012 to €54.1 billion (£44.6 billion), while revenue from the automotive division fell by almost five per cent. As a group, PSA held debt of over €4 billion (£3.3 billion) at the end of last year. The company warned it may not halt losses until 2016.

Speaking at a press conference, incoming PSA boss Carlos Tavares said he saw "potential for improvement" in Europe, saying that with the new deal "PSA is back, and we will write another chapter in its history".

Tavares revealed a new plan to aid the recovery of PSA, focusing on giving the brand greater differentiation between vehicles to improve its market position, while also growing its competitiveness in Europe. "We need to identify models that create value," he said.

Current President Philipe Varin said Dongfeng's investment would be used "to invest more in R&D to stay in the race, and we must invest in our plants in Europe and beyond".

Quashing rumours that Dongfeng's influence would cause PSA to 'go Chinese', Varin said: "PSA will remain independent in the future, but we will benefit from the support of our Chinese partner both there and in Asia. We will remain French with our own identity.

"In Europe we are going to reap the benefits. Our products and brands are stronger, just look at the Peugeot 308 and the Citroën C4 Cactus."

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Comments
3

19 February 2014
Here's hoping they'll now have enough money to take a proper long term approach and re-enter the one big market from which they are absent. The USA

20 February 2014
I don't see why they would want to launch into a competitive market that is at saturation point. They would be better getting their own house in order, ie Europe, and concentrating on emerging markets like China.

20 February 2014
We need PSA to survive, and if this is the way then OK. The cars they have offered in the last 10 years have nearly all been poor, yet 10 years before that nearly every car was best in class. I think its got far more to do with engineering, and management than the economic turndown. After all, VW havent done so badly in the last few years. Some of their recent offerings have shown signs of improvements. I hope having more money behind them allows some decent engineering, and the management changes can only be a good thing.

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