PSA Peugeot Citroen, one of the leading automakers in the world, is in a big trouble. It has been circulating in the market for quite sometime that PSA is going through a major financial crisis. City sources have already established that PSA might not be able to continue to 2014 due to lack of running capital. If quick measures are not taken, PSA might not remain as a brand in the world of automobile.
PSA Peugeot Citroen, is a French company that was established in the year 1976. It is an alliance between two companies, Peugeot and Citroen. Initially it was a fruitful deal. But somewhere between 1980 and 1985 the company suffered heavy losses due to some bad decisions. In the year 2012, PSA sold 7% of its shares to GM to help aid its failing business. In the same year the company saw a 10% drop in its work force. Now it has been revealed that the company cannot make it to the next year due to budget constraints. PSA is trying to persuade General Motors to take over and help the company survive this difficult phase.
A problem with this plan is that once GM gains power, it will shut various of the present manufacturing unit in France and Germany, which the French government might oppose to strongly.
PSA Peugeot Citroen did try to arrange finances from other sources, but it could not find appropriate bidders. It also tried to sell a major portion of its shares to Dongfeng Motor Group but the deal could not be worked out. This leaves only GM motors which already owns 7% of its shares.From the previous alliance with GM motors, PSA made an annual saving of 2 billion. So it is definitely wishing for GM to take over. The chief executive of PSA, Phiipe Varin, has supported this idea.
GM, General Motors, is one of the largest automobile companies in the world in terms of production as well as annual sales. It has its market in more than 157 countries where it either works through its subsidiaries or joint ventures. It launches its vehicles through various known brands. It is obvious for PSA to take GM as its rescuer.
Reuters has quoted from a reliable person on this matter as, “The Peugeot family has
now accepted that they’ll lose control. PSA will need to present a new industrial plan for people to underwrite a capital increase, and the only hope is GM. They (GM) are ready to inject more money if they can control the business, integrate Peugeot and Opel and rationalize production.”
GM heads are ready to work on the deal if it gets an assurance that it can go ahead and stop certain manufacturing plants in the country at “reasonable costs”.
It seems certain that PSA is running out of time and handing over the business to GM is the only solution it has.