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