Jan 20 - PSA Peugeot Citroen's board has reportedly approved an outline deal to raise cash by selling stakes to China's Dongfeng and the French government. But as Sonia Legg reports, the car maker's troubles are far from over.
China to the rescue once again - this time at PSA Peugeot Citroen. Reuters believes the French car maker has approved a survival plan. But it's a contentious one involving the issue of 3 billion euro in new stock. The founding Peugeot family couldn't agree on the best way forward. And the board has now gone against the Chairman by agreeing, in principle, to a capital increase that would give China's Dongfeng a minority stake, along with the French government. The news came as Peugeot announced a further near 5% fall in global vehicle deliveries for 2013. Investors reacted badly to both sending shares down almost 10% on the news Joe Rundle is Head of Trading at ETX. (SOUNDBITE) (English): JOE RUNDLE, HEAD OF TRADING, ETX CAPITAL, SAYING: "Its core market is Europe and Europe's car market is certainly far from healthy so really this financing deal with the Chinese is useful and it can expand into China but I still think there are some woes to come from Peugeot Citroen in the short term." Peugeot and Dongfeng are already partners in a joint venture in China. And they've been in talks for months about extending co-operation to other Asian countries. Peugeot certainly needs new markets. It's been one of the worst casualties of the European slump. But the deal will hurt the founding family. Its current quarter stake gives 38% of voting rights. Under the new deal the family will share control with the French government and the Chinese. That prospect prompted a pledge from France's Finance Minister. He insisted whatever else they agree the company must remain a major "French" car maker.