Dongfeng Considers 30% Stake In PSA Peugeot Citroen

New reports are surfacing about the interest of Dongfeng to become the largest shareholder in PSA Peugeot Citroen, the French family-owned automaker who are currently ranked as the second largest in Europe. China Business News reported that Dongfeng insiders have now confirmed last week’s rumours that the company was in talks with the struggling PSA Group to acquire a 30% stake worth a whopping CNY10 billion in a direct investment. The report from an unnamed Dongfeng insider said that the talks were at an early stage, and much had to be resolved and much uncertainty still existed. Officially, Dongfeng has declined to comment and an official from PSA stated that they do not comment on rumours. The move is seen as a great opportunity for the Chinese company who currently is the second largest auto manufacturer in China. Dongfeng will probably get a knockdown price as PSA has been deeply impacted by the Eurozone crisis, with reported losses of EUR5 billion in 2012, an 18% drop in global sales in the past 3 years and plans to close a plant in France with a loss of some 11 000 jobs. PSA has already had help this year from the French government, when they received aid through their ailing bank and credit arm. Zhong Shi, an independent auto analyst based in Beijing, believes that the French government will always look to support PSA as it is one of the largest companies in France, so an investment would not bring any undue risk to Dongfeng; although, the European Union do have specific rules that prohibit the sort of nationalistic favoritism that Zhong thinks will occur.

Dongfeng and PSA are no strangers to each other image: chinaautoweb More to the point, Dongfeng and PSA are no strangers. In China, they already have a strong history of cooperation with three JV factories and a vehicle manufacturing capacity thought to be approaching a million units per year. In fact, China is now the biggest single market for PSA where sales grew a reported 32.7% in the first half of the year, contributing a very tidy CNY30.7 billion in revenue to the French company. Any tie up would only cement this relationship for both companies, making it more stable in the long run and allowing greater influence for Dongfeng. In fact, it is easy to see how the deal would be a winning proposition for both companies as PSA would gain a much needed capital injection that would enable them to restructure at home and other markets; Dongfeng would get access to the sort of technology to drive its own branded vehicles to the next technological level and make them more competitive on a global stage. Chinese car manufacturers are obviously becoming stronger and are looking to stake their place outside their country. Traditionally, Chinese automakers were joint venture darlings of the larger European, Japanese and American manufacturers, who rushed to share technology with their underdeveloped counterpart in exchange for a toehold in the biggest undeveloped market in the world. Geely made perhaps the first proper international acquisition move in 2010 when it successfully took a stake in Volvo of Sweden, so most analysts are expecting more moves whereby Chinese automakers gradually change their roles from partners to investors.