March 28, 2024

Europe Is Watching as France Weighs Options for Peugeot

On Friday, after more signs of financial stress at PSA Peugeot Citroën, Budget Minister Jérôme Cahuzac said the government was considering its options, including taking a stake in the carmaker through France’s strategic investment fund.

“Let’s be clear, the company cannot and must not disappear,” he told RMC radio and BFM television. “We have to do whatever is necessary to support it.”

But Mr. Cahuzac was later contradicted by officials who outrank him, including Prime Minister Jean-Marc Ayrault, who said that Peugeot was not seeking aid, and Finance Minister Pierre Moscovici, who said that intervention along those lines “is not on the agenda.”

Those hasty correctives may or may not assuage concerns elsewhere, but the issue is sensitive among Europe’s industrial leaders. Any attempt to prop up Peugeot could strain France’s relations with Germany, whose carmakers have not been hit nearly as hard by the downturn in the region’s economy and auto market. And any helping hand from the Élysée Palace could provoke workers in Italy to call for similar actions to help Fiat, the country’s largest employer, which is also under severe pressure.

The officials made their comments after Peugeot, the biggest automaker in Europe after Volkswagen, said late Thursday that it would mark down the value of its car plants and other automotive assets by more than one-fourth — by about €3.9 billion, or $5.2 billion — to reflect “the impact on the group of the deterioration of the European market.”

That charge, and an additional €243 million write-down for what the company called “onerous” contracts — which include a supply deal with Iran — will make a big dent in the bottom line when Peugeot reports its 2012 results Wednesday. But the company and government officials were at pains to note that the noncash charges would not affect its solvency.

Pierre-Olivier Salmon, a PSA Peugeot Citroën spokesman, declined to comment Friday.

Some of the problems facing Peugeot are shared by its competitors. The European Union’s car market shrank 8 percent last year, to just over 12 million units, according to the European Automobile Manufacturers’ Association, reducing demand for new cars to the lowest level since 1995.

But Peugeot did worse than the Union’s overall market, with deliveries falling 13 percent, hurt by its reliance on South European markets where the euro crisis and austerity hurt demand. Its profitability has suffered from its concentration on lower-price models with thinner profit margins, compared with Germany’s automakers.

As its woes have mounted, its market value has slipped to about €2.1 billion, compared with about €80 billion for Volkswagen.

German automakers like Audi and Mercedes-Benz, as well as Volkswagen, have been able to compensate for weakness in Europe by selling cars in the United States, where Peugeot is not present. What is more, the German domestic market has remained relatively stable, falling only 3 percent last year, compared with the 14 percent drop in France.

German automotive companies regard their success as the payoff for years of investment in foreign markets, and would clearly resent any of their European competitors’ receiving government support. A spokesman for the German Association of the Automotive Industry declined on Friday to comment on Peugeot’s situation. But he referred to a speech last week by the president of the group, Matthias Wissmann, who implicitly criticized state aid for weak carmakers.

“It would be better if everyone were to improve their own competitiveness,” Mr. Wissmann said in Berlin. “The principle must apply, also in Europe, that we orient ourselves on the strong, not on the weak.”

German manufacturers sold nearly 1.3 million cars in the United States last year, a 21 percent increase over 2011. Although Fiat has also begun a renewed push into the U.S. market, thanks to its control of Chrysler, right now the German automakers are the only European manufacturers with a strong presence there.

Volvo Cars of Sweden also has a long tradition in the United States, but its sales of 68,000 vehicles last year were far behind the Germans.

Article source: http://www.nytimes.com/2013/02/09/business/global/peugeot-citroen-takes-5-2-billion-writedown.html?partner=rss&emc=rss

Merkel Arrives in Paris to Begin Economic Talks With Sarkozy

PARIS — With new official figures showing that economic growth in the heart of Europe is slowing, Germany’s chancellor, Angela Merkel, arrived in Paris on Tuesday for a highly anticipated meeting with France’s president, Nicolas Sarkozy, to discuss new measures aimed at reining in government deficits and calming investor worries about the future of the euro currency union.

As Mrs. Merkel arrived at the Élysée Palace, she and Mr. Sarkozy faced mounting pressure to forge a joint approach to a widening economic crisis that has already engulfed Ireland, Greece and Portugal and threatens to pull in Spain and Italy as well.

A news conference was scheduled for 6:30 p.m. Paris time. Yet even before the leaders spoke, aides to both sought to temper expectations of any breakthrough proposals.

Steffen Seibert, Mrs. Merkel’s chief spokesman, warned Monday against expectations of a “big bang” from the meeting. “It is and remains a process,” he told reporters in Berlin, Bloomberg News reported. François Baroin, France’s budget minister, indicated that the two leaders would probably limit themselves to vague recommendations about tighter enforcement of the union’s deficit limits and closer coordination of national economic policies.

The summit meeting comes as European stock markets were in retreat Tuesday for the first time in four days. The euro slid against the dollar after fresh economic data showed that growth in the euro area fell more than expected in the three months through June and that growth in Germany came almost to a standstill.

Gross domestic product in the 17-nation euro area rose 0.2 percent in the second quarter of 2011 compared with the previous quarter, according to Eurostat, the bloc’s statistics agency. Euro area growth was down from 0.8 percent in the first quarter.

G.D.P. growth in Germany, which has been the region’s economic locomotive, fell to 0.1 percent compared with the previous quarter, when the economy expanded 1.3 percent, the German Federal Statistical Office said. Analysts had expected growth of 0.5 percent.

Those gloomy statistics followed news on Friday that showed the French economy, Europe’s second-largest after Germany’s, did not grow at all in the second quarter. Slower growth means that tax receipts will also grow slowly, which will make it harder for Germany and France to support countries like Italy and Spain that are finding it increasingly difficult to borrow money at interest rates they can afford.

Greece is already in recession, while growth in Spain is slowing down more than expected this year. The Portuguese government expects the economy to contract 2.3 percent this year, compared with a previous forecast for a 2 percent decline.

German and Italian shares led a broad decline in European stocks Tuesday. Germany’s DAX index was down 0.7 percent in late afternoon trading, while the FTSE Italia index shed 1.3 percent. France’s CAC 40 was 0.6 percent lower and Spain’s IBEX slipped 0.87 percent.

The euro fell 0.47 cents to $1.4397.

Mrs. Merkel’s critics have accused her of lacking the necessary sense of urgency to restore confidence in the euro and calm the crisis. But Germany is in many ways in the eye of the storm, with barely a hint of the winds swirling nearby. There is no tear gas, as in Athens; no tires burning, as in London; no chanting crowds packing public squares, as in Spain. While much of the rest of Europe is struggling to pass harsh austerity packages, Germany is in the midst of a debate over cutting taxes by as much as $14.2 billion.

In France, the streets have also been calm so far. But last week, Mr. Sarkozy, who faces re-election in 2012, interrupted his vacation to fight concerns that the country might lose its AAA credit rating if it could not bring down a high debt and deficit. Meanwhile, several of France’s leading banks were buffeted by rumors over their financial health, prompting the country’s stock market regulator to impose a two-week ban on short-selling of financial shares and to open an investigation into the market turbulence.

Nicholas Kulish contributed reporting from Berlin and Jack Ewing from Frankfurt.

Article source: http://feeds.nytimes.com/click.phdo?i=e4ef62725f6f2b9c3d265a21d5a277ed