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Paris to PSA's rescue, again?

February 8, 2013

French newspaper reports have indicated the government in Paris is contemplating bailing out struggling carmaker PSA once again. The company has only just announced a massive writedown for 2012.

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An employee works on the assembly line of the Citroen C3 at the PSA Peugeot Citroen plant in Poissy REUTERS/Benoit Tessier/Files
Image: Reuters

Commenting on press speculation that the state could once more come to the rescue of ailing French carmaker PSA Peugeot Citroen, the country's Budget Minister Jerome Cahuzac told RMC radio on Friday that such a move was possible.

"Let's be clear, the company shouldn't, must not disappear - thus we have to do what is needed so this firm survives," Cahuzac commented. The idea is for France to take an equity stake in PSA through the state-run Strategic Investment Fund (FSI) which has been providing bailout money for struggling firms.

With unemployment climbing over 3 million in France, plans by PSA to close a plant near Paris and axe about 8,000 jobs had triggered a public controversy.

Bleak 2012 figures

The carmaker, which had announced a production tie-up with US auto giant General Motors (GM), was already rescued from bankruptcy last year with state guarantees of some 7 billion euros ($9.3 billion) for the group's banking and credit operations.

PSA on Thursday reported a massive writedown of 4.7 billion euros for 2012, reflecting the dilemma the company was still finding itself in because of a painful sales slump across Europe and the debt-stricken eurozone in particular.

Analysts were in agreement that PSA's current situation wasn't yet dire, but that an early intervention by the state could provide the firm with more planning security as it restructured and streamlines its operations in a bid to return to profitability.

hg/kms (AP, dpa)