Peugeot’s Plans to Raise Capital Hits Roadblock

The Peugeot logo on a Peugeot 308 at the new assembly line inauguration in Douvrin, norther France, Oct. 29.PHILIPPE HUGUEN/AFP/Getty Images

Peugeot’s plans to raise capital may not succeed because Chinese carmaker Dongfeng wants to buy less of the French company than anticipated, according to sources cited by Bloomberg.

French media had reported earlier on Wednesday that the French government and Dongfeng Motor Co. would take an equal stake of 30 percent in Peugeot to raise $5.4 billion earlier today. 

According to Les Echos, the Peugeot family, which owns 25.5 percent of PSA Peugeot Citroen and 38 percent of the voting rights, met with Dongfeng last week and reluctantly gave consent. This would have made Peugeot the first major European automaker partially owned by a Chinese company. The family had previously passed up deals with other autos brands like BMW, Mitsubishi, in order to retain control.

Wednesday, sources familiar with the matter told Bloomberg Dongfeng only wants to buy 10 percent of the shares to be issued. As a result, the Peugeot stock dropped 7 percent in Paris trading.

PSA Peugeot Citroen had been looking to those sources to raise capital and step away from its partnership with General Motors Co. GM owns 7 percent of Peugeot and has not showed any indication to participate in the capital raising.

Even in Europe, its core market, Peugeot continues to report losses. It posted losses of $686 million for the first half of the year and needs money to expand outside Europe. Peugeot currently runs three factories with Dongfeng in China. 

The French state, which had helped the company last year with financing and credit guarantees, is interested in keeping the automaker’s jobs in France and may take a bigger stake in Peugeot. However, that could undermine its plans to expand.

Another option to raise money Peugeot would be to sell its majority stake in car manufacturer Faurecia SA, but Peugeot said Wednesday it would not do so.

“Faurecia is a strategic asset that creates value and of which a sale does not figure on the group’s planned route,” the company told AFP.