Doubts arise on whether PSA-Dongfeng-France tie-up may bring stability

Article by Anita Panait, on February 20, 2014

Observers say PSA/Peugeot-Citroen may not stabilize even with its capital tie-up with Dongfeng Motor Group and the French government. For instance, French financial daily Les Echos called the deal "the dragon that came to the rescue of the lion.” It added the while the lion isn't dead, “it has radically changed its appearance."

Director of the GERPISA car industry research network, Bernard Jullien, told Les  Echos that the PSA-Dongfeng alliance will be a partnership without precedent,  warning that the PSA-Dongfeng-France triumvirate could result to instability.

PSA recently announced a EUR3 billion ($4.1 billion) capital hike in which Dongfeng and the French government will each inject EUR800 million for 14 percent of the carmaker, with the founding Peugeot family seeing its stake drop to 14 percent from the current 25 percent stake and 38 percent of voting rights.

In an interview on France Inter radio station, minister of industrial renewal Arnaud Montebourg defended the agreement, contending that it will allow PSA and Dongfeng to play to their strengths. "PSA is a company with the technology, the marques, but has not been able to grow in Asia, while Dongfeng doesn't have the technology or the marques, but has the growth in Asia," he remarked. Montebourg also defended the government's investment in PSA.

"We have taken the decision of economic and industrial patriotism," he said. On the other hand, Gilles Carrez, chairman of the National Assembly's finance committee, told Europe 1 radio station that PSA "had no choice" but to go with the agreement since it "did not know how to operate globally.”

The Financial Times, meanwhile, said, "Now, the question remains over how successfully the group can execute its plan under the aegis of new chief executive Carlos Tavares. The article remarked that Tavares will have to manage potentially conflicts in the board room, with likely two seats each going to “Beijing, the Elysee Palace and the divided Peugeot family.''

Topics: psa, dongfeng

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