The Peugeot HR1 battery car concept. Peugeot itself now needs a charge-up.
Growing increasingly desperate after watching another 13% sales drop last month, inside leaks suggest French automaker PSA Peugeot Citroen is looking for a bailout from the French government.
The troubled automaker denies the reports, however, this could be the first step in the negotiation process between Peugeot executives and the new French government, which appears highly unlikely to let the company flounder as the European recession spreads and eats into the automotive business across the continent.
The reports also illustrate the underlying weakness of General Motors plans for fixing Opel, which leans heavily on forging a PSA-Opel alliance.
GM paid $400 million for a 7% stake in Peugeot earlier this year and is already turning to PSA for assistance in repairing its floundering European operations, which are steadily losing market share and piling up red ink. The losses at Opel are now expected to color GM’s second quarter earnings report, which is due August 2.
In addition, while PSA is likely to get help from the French, if deemed necessary, Opel has emerged as something of an orphan in the European car business since it has no strong governmental support anywhere except perhaps in Poland and Great Britain, neither of which would necessarily be eager to put up cash to rescue Opel’s core German operations.
The festering problems in the European automotive business, however, also add a fresh twist to the ongoing saga of the US automotive bailout, which is certain to remain an issue during the U.S. Presidential campaign.
Since the U.S. still owns about 25% of GM, U.S taxpayers also now own a piece of Peugeot, which is losing major amounts of cash.
Peugeot’s automotive division lost $123 million last year and more losses are anticipated in 2012. Moody’s downgraded Peugeot’s credit rating to junk status with a negative outlook, citing “severe deterioration” of its finances.
GM has said the deal with the French carmaker is designed to give the U.S. company access to Peugeot’s expertise in small car and hybrid vehicle technology and ultimately allow both GM and Peugeot to save money by pooling their resources.
But auto industry analysts have been cool to the alliance, which doesn’t address Opel’s key problems such as uncompetitive labor costs. It is “somewhat baffling that GM is willing to get involved in an alliance that it frankly does not need for size or complexity, while still avoiding any public plan to rationalize its European production, cut costs, or deal with labor rates,” the IHS consultancy noted after the PSA-Opel deal was finalized in last winter.
Just great! Two losers hooked up together and the tax payers are still on the hook here in the U.S.
Hard to dismiss GM, after 2011 record profits and regaining its global sales crown as a “loser,” though clearly its European operation is a mess. In fact, what would 2011 earnings have been if Europe had done a turnaround? And how many other strong European makers are there right now, especially if you focus specifically on their European operations?
Paul A. Eisenstein
Publisher, TheDetroitBureau.com
I agree with Paul, it’s good to see GM turn around. Replacing their traditionally bad management team helped. Remember when they flew into DC on private jets to beg congress for a bailout? Sheesh, the nerve of some people. As for Peugeot, I’m not a fan. I bought a brand new 1989 Peugeot 405. It was the worst car I’ve ever owned. The way I look at it, they still owe me a refund. By the way, my 2012 Focus was totalled in a wreck (100% the other driver’s fault, her insurance paid it all) recently. I replaced it with a Jetta Sportwagen TDI. Both are very nice cars, but the Golf/Jetta is what the Focus aspires to be. And it’s getting closer all the time.
Hi, Bryan,
Sorry to hear about the accident and hope you’re okay. Glad, meanwhile, you’ve got a new vehicle you like.
And yes, I recall Peugeots of the past. But I also recall bad Mazda rotaries (I owned a 1973 RX2), Fords, Chevies and, yes, VW. The latter is still trying to overcome its bad quality reputation with American motorists.
Paul E.
In ENGINE-EXPO-INTERNATIONAL, May 2008 Stuttgart Germany
A Group of engineers of PSA Citroen,
Could not believe that such a simpler VVA system, as the:
http://www.pattakon.com/pattakonRoller.htm
could be this better than the BMW Valvetronic, their Company, the PSA, was buying (licensing) from BMW.
They promised to come to Greece and Road-test the Prototypes, to see by themselves IF a 250 PS prototype is as green as their 1000 cc family cars.
New, Greener versions are available today, such as:
http://www.pattakon.com/pattakonHydro.htm
http://www.pattakon.com/pattakonDesmo.htm
PSA engineers are welcome to road-test the brand new Alfa-Romeo Prototype
Or just ask FIAT Powertrain about this THERMODYNAMIC modification of the FIAT’s MultiAir Innovation.