PSA Peugeot Citroen Bailed Out By China’s Dongfeng, French Govt Photo:

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Trevor Collett | Feb, 21 2014 | 0 Comments

PSA Peugeot Citroen has been given a €1.6 billion financial rescue package from the French Government and China’s Dongfeng Motor Group this week as part of a three billion euro fundraising for the giant carmaker.

Each is chipping in €800 million (AU$1.2 billion) for 14 percent of the company, matching the Peugeot family’s reduced holding and ending more than a century of control by the family.

With a loss last year of €2.32 billion, PSA Peugeot Citroen has warned that it will likely continue to lose money until 2016.

A further €1.4 billion (AU$2.1 billion) will come from established PSA investors.

The rescue package will enable the carmaker to invest in hybrid technology and low-cost cars, as well as expand its reach into Mediterranean and Asian markets.

In a historic moment for the company, the Peugeot family will see its share reduced from 25 percent to 14 percent (matching Dongfeng and the French Government).

Under the new structure, Peugeot and Dongfeng intend to expand their current joint venture. With the addition of new models and new markets, the JV partners have a target of 1.5 million annual vehicle sales for PSA Peugeot Citroen by 2020.

PSA will soon welcome a new CEO, with Carlos Tavares taking over from Philippe Varin on March 31.

Mr Tavares said he saw “huge room for improvement”, and promised a back-to-basics style leadership.

"It's a return to fundamentals," Mr Tavares said. "Our challenge is to be the best of the Europeans in terms of manufacturing and distribution, which frankly is not the case today.”

The incoming CEO said that Peugeot will aim to reduce costs by sourcing parts more competitively, and Citroen's new stand-alone DS line would be fast-tracked.

Some of PSA’s 60 models will face the axe to further reduce costs, but it is unclear at this stage which models will go.

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