France floats Peugeot stake option after writedowns

The French government floated the possibility of buying a stake in PSA Peugeot Citroen after the ailing automaker announced second-half writedowns of ^4.13 billion ($5.53 billion) amid Europe’s plunging auto sales.

“Let’s be clear: this company cannot, must not disappear,” French Budget Minister Jerome Cahuzac said today on RMC radio. “We’ll have to do what we have to do to save this company.”

Auto sales in the European Union slumped the most in 19 years in 2012 and auto executives are forecasting a further decline for this year. Peugeot, whose deliveries in the region in 2012 dropped 13 per cent, expects the market to contract as much as 5 per cent in 2013. The automaker is trying to stem losses that a union leader said are ^7 million per day.

The French government is studying taking a Peugeot stake as an “hypothesis of last resort,” French daily Liberation reported today, without citing anyone.

The government could also support a capital increase for the carmaker if necessary, the newspaper said. Pierre-Olivier Salmon, a Peugeot spokesman, declined to comment on the report when contacted by Bloomberg.

“The only thing I can tell you, and I can’t say whether it’s true or false, is that it’s possible because there’s the Strategic Investment Fund,” Cahuzac said in the interview. “If the FSI enters into the capital of this company, it’s in fact the state one way or another that’s entering.”

Shares gain

The shares gained as much as 26 cents, or 4.3 per cent, to ^6.13 and were up 4.2 per cent as of 9:28 am in Paris. The stock has plunged 55 per cent in the last year, valuing the carmaker at ^2.18 billion.

Peugeot is writing down the automotive division’s property, plants and other assets, which were valued at ^14.5 billion at the end of June, by ^3.89 billion.

The automaker is also taking a second-half charge of 243 million euros for what it called “onerous contracts.”

“This calculus results from cautious assumptions about the European economic environment,” Chief Financial Officer Jean- Baptiste de Chatillon told reporters in Paris late yesterday.

“We think that this European car market will remain affected by the crisis for a long time.”