Peugeot-Citroen signs £1.3bn rescue deal

French car manufacturing giant PSA Peugeot-Citroen has signed a £1.32 billion deal with Chinese carmaker Dongfeng Motors and the French government to secure its future.

The far-eastern firm and the French government will each invest €800 million (around £660 million). Both organisations will receive a 14% stake in the business.

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The deal is still subject to a vote by PSA shareholders; pending ratification, a further €1.4 billion (roughly £1.15 billion) will be raised by existing Peugeot investors. It is thought the deal will be approved.

In 2012 the firm reported huge loses of £4.3 billion, although having announced its 2013 financial results today, this has been stemmed slightly to €2.32 billion (approximately £1.9 billion).

Europe’s second-largest car manufacturer also announced that it still expects to lose money every year up to and including 2016.

With €7 billion (£5.77 billion) in governmental loan guarantees due to expire that year, the deal looks to have come at exactly the right time for Peugeot-Citroen.

However, there is a catch.

Pending approval by shareholders, the agreement means the Peugeot family that originally founded the company will have its stake diluted down to 14% from the current level of 25.4%.

This means after 114 years, the Peugeot family will be relinquishing control of the company.

We think the deal is a positive, however. The hard facts are that PSA is losing money and needs to secure a financial footing for the future – this agreement will hopefully give the company just that and greater penetration of the Chinese market.

And with strong product from Peugeot-Citroen currently on the market and in the pipeline – the Peugeot 308 and Citroen C4 Picasso are good cars, and vehicles like the C4 Cactus and advances such as Hybrid Air technology should keep them at the forefront of the market – the future is bright for the company.

And it could be about to get brighter still for PSA Peugeot-Citroen – especially as former Renault executive Carlos Tavares will take the helm at the end of the month.

Tavares has his work cut out, but he’s the type of bullish figure that could just help turn the French manufacturing group’s fortunes around.

On Bing: see pictures of Peugeot and Citroen cars

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Find out how much it costs to buy a used Citroen on Auto Trader

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Read a Citroen review on MSN Cars

PSA Peugeot Citroen loses £4.3bn in 2012

By motoringresearch.com