Speaking Friday morning on RMC radio and BFM television, Budget Minister Jérôme Cahuzac said the company “cannot and must not disappear, we have to do whatever is necessary to support it,” possibly with the government’s strategic investment fund.
The company, maker of the Peugeot and Citroën brands, said late Thursday that it was marking down those assets by about €3.9 billion, or $5.2 billion, to reflect “the impact on the group of the deterioration of the European market.” That, and an additional €243 million write-down for what the company called “onerous contracts, will have a direct impact on the bottom line when it reports 2012 results on Wednesday.
The company had valued the automotive assets on its books at €14.5 billion at the end of June. It said the write-downs would “not involve any cash-out, nor will it affect either the group’s liquidity or its solvency.” Nor is it related to goodwill, or the value of intangible assets such as the company’s brand.
Rather, the accounting measure reflects an acknowledgement of “the deterioration of the European market, which is likely to remain at 2012 levels for the foreseeable future.”
Shares of Peugeot Citroën were up 18 cents at €6.05 in early trading in Paris.
Even before the new write-offs announced Thursday, analysts surveyed by Reuters had been expecting a 2012 net loss of about €1.52 billion for the year.
The car market in the 27-nation European Union last year shrank by 8.2 percent from 2011, according to the European Automobile Manufacturers’ Association, bringing new car demand to just over 12 million units, the lowest since 1995.
PSA Peugeot Citroën did worse than the overall market, with deliveries declining 13 percent. The company, the second-largest E.U. carmaker after Volkswagen, is pressured more than many of its rivals by its dependence on European market.
It has already announced plans to close a plant in Aulnay-sous-Bois, near Paris, and hopes to cut 11,200 jobs from its French work force of roughly 97,000 people, mainly by offering early retirement and buyouts. Those restructuring plans were put on hold last week, when a French court ruled that the company had not adequately discussed its plans with workers at an affiliate.
Peugeot also sold a 7 percent stake to General Motors last year; it and the American automaker, which is struggling to turn around its own European unit, Adam Opel, have agreed to cooperate loosely on logistics and on some vehicle projects.
Libération, a French daily, reported Friday without identifying its source that the French government, which owns just over 15 percent of Peugeot’s French rival, Renault, was considering its options regarding Peugeot and might take a stake “as a last resort.” Last autumn, the state extended credit guarantees worth €7 billion to the company’s finance unit, to ensure that potential buyers could still get loans at competitive rates as the company’s own deteriorating balance sheet weighed on its ability to tap investors.
Asked Friday about the possibility that the government would become a shareholder, Pierre-Olivier Salmon, a company spokesman, declined to comment.
PSA Peugeot Citroën said the €3.9 billion depreciation charge included a write-off of about €3 billion on automotive division assets for 2012, as well as an €879 million markdown in the net value of deferred taxes.
The company said there would be another €855 million in write-downs for 2012, including €612 million it has already announced. Taken together, it emphasized, the charges will contribute to PSA Peugeot Citroën’s 2012 net loss “but do not affect its solvency nor its liquidity. The depreciation of these assets has no impact on cash.”
It also said it expected to meet its 2012 target for net debt of roughly €3 billion.
Article source: http://www.nytimes.com/2013/02/09/business/global/peugeot-citroen-takes-5-2-billion-writedown.html?partner=rss&emc=rss
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