Chinese company Dongfeng Motor will pay about $1.63 billion to secure a 30% stake in PSA Peugeot-Citroën, according to reports in the Chinese media. Already, Dongfeng functions as PSA's Chinese partner and both of them operate three assembly plants in China. The company has denied that there was any deal and told Chinese media that it was doing only 'preliminary research' on investing in PSA.
If Dongfeng makes this move, it will pose a problem for PSA's partnership with General Motor's Opel-Vauxhall brands. GM owns a 7% stake in PSA and the two have unveiled plans to merge production of their respective compact MPV and SUV models onto a PSA platform.
PSA's financial problems are well known, with the company posting losses of $6.8 billion in the 2012 financial year alongside automotive revenue dropping by more than 10%. Last June, there were reports that the Peugeot family, which owns a 25.4% stake in the business, may step back to permit GM to take over the company.
Many widely believed that the Peugeot family announcement was meant to prove the seriousness of its financial position. GM and PSA recently made an announcement that majority of their future compact MPV and compact SUV models will be produced in the same plant, built with PSA platforms and engines but using Opel’s engineering and manufacturing plants.
There are domestic problems facing any agreement between Dongfeng and PSA. Talks are ongoing between the PSA and the unions in order to cut overtime pay and freeze salaries in exchange for more French production and investment. Any agreement will need those negotiations to be completed.