PSA/Peugeot-Citroen signs tie-up with Dongfeng Motor Group

Article by Christian Andrei, on March 28, 2014

A framework agreement for Dongfeng Motor Group and the French government to inject fresh capital into PSA/Peugeot-Citroen has been signed. The signing of the agreement -- which would result to Dongfeng and France taking matching 14-percent stakes in PSA -- was graced by French President Francois Hollande and visiting Chinese President Xi Jinping.

President Hollande remarked that agreement turns PSA into a carmaker of global dimensions with presence on all markets. He remarked that the partnership is no longer just about selling, but about investing together. The tie-up allows PSA and Dongfeng to further expand their existing Chinese joint venture to co-develop vehicles, hike production as they try to capture a larger share of Chinese vehicle market and sell their offering in Asia.

Incoming PSA chief executive Carlos Tavares is now tasked to turnaround the carmaker’s lossmaking operations in Europe; stop its financial bleeding in Latin American; deliver on its plans in China; and handle its slumping operations in Russia. The agreement had pitted chairman Thierry Peugeot against his cousin Robert over the dilution of the family's stake and loss of control.

Robert Peugeot, who leads the family's holding company FFP, said in a radio interview that it is normal to have discussions and differing opinions “when you pass major milestones.” He noted that when the day for decisions comes, they are taken unanimously.

PSA is banking on China to turnaround its fortunes, vowing to near-triples sales with Dongfeng to around 1.5 million vehicles by the end of the decade. A spokesman disclosed that in PSA’s Chinese venture with Changan, the carmaker expects to sell out its annual production capacity of 200,000 upscale DS vehicles by 2016.

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