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Investors Wary of Alliance Talk for Peugeot

June 28, 2013 by Leave a Comment

It would not, investors seemed to have decided Friday, as a rally in the shares of the French carmaker PSA Peugeot Citroën fizzled along with speculation about a stronger alliance with General Motors and its Opel unit.

According to such speculation, based on a report Thursday by Reuters, the Peugeot family was ready to cede control of the ailing French carmaker that bears its name. The family, which holds a 25.2 percent stake and about 38 percent of the voting rights in Peugeot, was prepared to give up control y if General Motors raised its stake from the 7 percent it already owned, Reuters reported.

Peugeot shares rose as much as 5.5 percent in Paris trading on Thursday based on the report, which also said that the Peugeot family had held talks with Dongfeng, a Chinese automaker. But Peugeot shares retreated on Friday after analysts said neither option was plausible. The shares were down about 3 percent Friday afternoon.

Neither Peugeot nor Opel, which uses the Vauxhall brand name in Britain, is selling enough cars to keep their factories busy. The plants, which cost money even when they are not being used, have contributed to large losses at both companies. In addition, Opel and Peugeot have suffered declining market share and are focused on the depressed European market, without enough sales in healthier regions like China to compensate.

“The business rationale doesn’t stack up,” said Paul Newton, an analyst at IHS Automotive, a market research firm. “They compete in all the same segments in the same markets.”

In both France, where Peugeot has most of its factories, and Germany, Opel’s home base, closing plants and laying off workers is extremely difficult because of labor laws as well as stubborn resistance from unions and political leaders.

“You’d really have to get to work and cut a lot of capacity,” Mr. Newton said. “It would be ugly really. I don’t know why they would want to do it.”

“There is no urgency about a capital increase,’’ a person close to the Peugeot family said, dismissing the reports of a G.M. or Chinese deal as “rumors.” The person, who asked not to be identified by name because he was not authorized to speak publicly on the matter, said the automaker “is always talking with its American and Chinese partners” as part of its normal business.

“But,” the person said, “the Peugeot family is very attached to its history and its stake in the firm.”

General Motors, which reported a loss of $200 million in Europe for the first quarter of this year, said it had no interest in raising its investment.

“Our position remains unchanged: we have no intention of investing additional funds into PSA at this time,” G.M. said in a statement. “We will not comment on speculation.”

But the fact that such talk was taken seriously underscores the perilous situation Peugeot is facing in a European market that continues to shrink five years after the financial crisis hit.

Peugeot, which reported a 6.5 percent decline in sales in the first quarter after a loss of 1.5 billion euros in 2012, is not big enough to finance new products as well as its competitors can or enjoy the same volume discounts on parts.

The automaker also suffers from its dependence on the dismal European market. Car sales on the Continent fell in May to their lowest level in 20 years, and analysts say there is little hope for a turnaround in the foreseeable future.

In Europe, the French company trails only Volkswagen in unit sales. But a vast gulf separates the two companies globally, thanks largely to Volkswagen’s international footprint, including in China, which has become the German carmaker’s largest market.

Peugeot also continues to be outperformed by Renault, its smaller French rival, largely because of Renault’s global alliance with Nissan Motor. The alliance gives Renault international reach that Peugeot, despite big gains this year in China and Latin America, cannot match.

Jack Ewing reported from Frankfurt.

Article source: http://www.nytimes.com/2013/06/29/business/global/investors-wary-of-alliance-talk-for-peugeot.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

France Reaches Deal to Save 600 Jobs at Steel Plant

December 1, 2012 by Leave a Comment

The deal, announced by Prime Minister Jean-Marc Ayrault, ends a tense, two-month standoff that escalated this week with the threat of a possible nationalization of the plant.

In a televised announcement, Mr. Ayrault said that while ArcelorMittal had agreed “unconditionally” to keep all 2,700 employees at its site in Florange, in northeastern France, two idled blast furnaces — at which 600 of those people worked — would remain offline until flagging European steel demand improved. Workers will be redeployed to other areas of the plant, he said, and there will be no layoffs.

“The government has decided against the idea of a temporary nationalization,” Mr. Ayrault said.

Nicola Davidson, a spokeswoman for ArcelorMittal, confirmed that an agreement had been reached but declined to discuss the details before a formal announcement on Saturday.

The accord appeared to end the ugly dispute, which had pitted the French state, in its traditional role as defender of industry, against a company with mounting debts that was trying to reduce capacity in response to the economic slowdown in Europe. ArcelorMittal, the world’s largest steel maker, had sought to close the two blast furnaces at the Florange plant permanently but wanted to continue operating a part of the facility that processes steel for the car industry.

In all, ArcelorMittal employs about 20,000 people in France.

With unemployment hovering above 10 percent, the Socialist government of President François Hollande is desperate to avoid more layoffs by name-brand companies. Several big employers, including PSA Peugeot Citroën, Air France and Sanofi, have announced significant job cuts this year. But some analysts said that by taking such a strongly interventionist stance to protect steelworkers, France risked sending the wrong signal to multinational companies, whose investment the economy needs if it is to stave off long-term decline.

ArcelorMittal had agreed to give the government until midnight Friday to find a buyer for the furnaces, offering them for a symbolic single euro, despite skepticism that a buyer would be interested in anything less than the entire factory.

Arnaud Montebourg, France’s industry minister, had previously insisted that the company agree to sell the whole plant and said that two companies were interested, although he declined to identify them.

It was Mr. Montebourg who first raised the possibility of a “temporary nationalization” of the Florange plant in a newspaper interview published this week. In the interview, the minister accused Lakshmi N. Mittal, the Indian-born billionaire who serves as the company’s chairman and chief executive, of “failing to respect France.”

Mr. Mittal, who built ArcelorMittal from the 2006 merger of his Mittal Steel with Arcelor, then the largest European steel maker, had promised at the time to help modernize the European steel sector. But the company said the Florange plant was already scheduled to close under Arcelor, its previous owner.

Stanley Reed contributed reporting from London.

Article source: http://www.nytimes.com/2012/12/01/business/global/france-reaches-deal-to-save-jobs-at-steel-plant.html?partner=rss&emc=rss

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DealBook: Peugeot in Talks to Sell Logistics Business

September 20, 2012 by Leave a Comment

A Citroen C3 is assembled at PSA Peugeot Citroën's plant in Poissy, France.Benoit Tessier/ReutersA Citroen C3 is assembled at PSA Peugeot Citroën’s plant in Poissy, France.

PARIS — PSA Peugeot Citroën said Thursday that it was negotiating to sell its Gefco logistics business to J.S.C. Russian Railways as the French automaker struggles to stay afloat in a faltering European car market.

PSA Peugeot Citroën, the second-largest automaker in Europe after Volkswagen, has entered exclusive negotiations to sell 75 percent of Gefco for 800 million euros, or about $1 billion. Gefco would also pay Peugeot a special dividend of 100 million euros.

The French automaker is reeling from its has heavy exposure to the European market and its dependence on relatively low-margin models. European new passenger car registrations are down 7.1 percent this year, and — with the euro zone in recession and uncertainty about the existence of the currency itself — analysts are not predicting a near-term turnaround.

A Finance Ministry report this month commissioned by President Francois Hollande found that PSA Peugeot Citroen needed to move quickly to close a French factory and cut thousands of jobs. It’s an indication of the gravity of the situation in a country where mass layoffs are discouraged.

Fitch Ratings cut its rating on PSA Peugeot Citroën on Wednesday, saying that it expected the company to burn cash through 2014 and that it was concerned about the carmaker’s ability to compete in the market for small and medium-size cars. The credit rating agency noted that it was unlikely that “the ongoing fierce competition and substantial price pressure” will abate in the near term.

PSA Peugeot Citroën said the deal, which is contingent on regulatory approval, would help Gefco to grow in China, India Latin America, as well as in Eastern and Central Europe, particularly Russia.

Earlier this year, Gefco, which had 2011 sales of 3.8 billion euros, signed an exclusive long-term logistics contract with PSA Peugeot Citroën’s automotive division. In late June, it reached a similar deal with General Motors Europe, under which it is to supply G.M.’s factories in Poland, Spain, Britain, Germany and Russia and annually ship 1.2 million finished vehicles across the world.

For the Russians, the acquisition is a foothold in the Europe that is important strategically, despite the risks in the economy that are troubling Peugeot. JSC Russian Railways, known as RZD, wants to develop an overland freight service between Asia and Europe for cargo that now travels on a longer and more circuitous journey by boat. It would use the trans-Siberian railway.

“The acquisition of Gefco would enable Russian Railways to increase the attractiveness of transit cargo flows along the Europe – Asia transcontinental route,” RZD said in a statement about the talks with Peugeot. “Russian Railways can offer competitive transportation services along this route after undertaking a significant amount of work recently. The next logical step is to develop a sales network for transit transcontinental transportation services via an international logistics company.”

Article source: http://dealbook.nytimes.com/2012/09/20/peugeot-in-talks-to-sell-logistics-business/?partner=rss&emc=rss

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Tax Me More, Europe’s Wealthy Say

August 31, 2011 by Leave a Comment

Maurice Lévy, chairman and chief executive of the French advertising firm Publicis, on Tuesday became the latest European business leader to ask for higher taxes on top earners, writing in The Financial Times that it was “only fair that the most privileged members of our society should take up a heavier share of this national burden.”

“I am not a masochist; I do not love taxes,” wrote Mr. Lévy, who is also president of a French association of private enterprises. “But right now this is important and just.”

The moves come after a similar proposition by Mr. Buffett, the billionaire investor and founder of Berkshire Hathaway. Mr. Buffett wrote in an Op-Ed article in The New York Times on Aug. 14 that the United States should stop “coddling” the rich and raise the top income tax rate in an effort to reduce the deficit.

Mr. Buffett’s comments started a debate among some of Europe’s elite as to whether austerity measures in some countries were too punishing for the poor while sparing the rich.

The multimillionaire chairman of Ferrari, Luca di Montezemolo, backed Mr. Buffett’s idea in an interview with the Rome daily La Repubblica. “I am rich and I am ready to pay more taxes, for reasons of fairness and solidarity,” Mr. Montezemolo told the newspaper.

This month, 16 of France’s wealthiest people, including the chief executive of the energy giant Total and the L’Oréal heiress Liliane Bettencourt, signed a petition published in the magazine Le Nouvel Observateur urging the French government to tax them more. Other signatories were the chief executives of Société Générale, Airbus and PSA Peugeot-Citroën.

A group of about 50 wealthy individuals in Germany, who have been campaigning for a higher top tax rate since 2009, said last week that it welcomed the French petition. “Austerity programs, which affect mainly the poor, are ill-suited to solve the crisis,” said the group, whose name in German means the Initiative of the Wealthy for a Wealth Tax.

On the Continent, government attitudes toward taxing the wealthy have so far been mixed. The French president, Nicolas Sarkozy, last week announced a 3 percent increase of the tax on the wealthiest individuals, which is expected to generate about $288 million a year.

In Italy, however, there were signs as recently as Monday that Prime Minister Silvio Berlusconi could be backpedaling on similar measures. The government on Monday dropped plans for a bonus tax on Italians earning more than 90,000 euros ($130,000) a year even though it would still apply to members of Parliament.

Some analysts said the calls for greater sacrifice from Europe’s wealthy might have sprung from growing concern that austerity measures in Europe were leading to social unrest, after protests in Greece and Spain and images of burning police cars and shops in the streets of London.

Jean-Philippe Delsol, of the Institute for Research in Economic and Fiscal Issues in France, said he found “surprising” the recent eagerness of top earners to volunteer to pay higher taxes.

“Maybe some are ashamed by what they earn,” he said. “But they can just ask to be paid less.”

Mr. Delsol said his research showed that higher top tax rates did not necessarily lead to larger tax revenue for governments because, for example, they could act as a disincentive to earn.

In Britain, where no top executive has yet joined the call for raising tax rates, the government is investigating whether the current rate of 50 percent on those making at least £150,000 (about $245,000) has actually improved public finances.

A spokesman for Britain’s business lobby group, the Confederation of British Industry, said Tuesday that it would continue to push for the abolition of the 50 percent top tax rate because it was “unhelpful in terms of attracting business people and entrepreneurs.”

The silence among Britain’s business elite on the issue has started to irk some commentators. “Where is Britain’s Warren Buffett or Liliane Bettencourt?” asked Polly Toynbee, a columnist for The Guardian newspaper.

Britain and Japan have the highest top tax rates among Group of 8 industrialized countries, according to the accounting firm KPMG.

Elisabetta Povoledo contributed reporting from Milan.

Article source: http://www.nytimes.com/2011/08/31/business/global/as-austerity-bites-europes-rich-speak-up-to-be-taxed.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,