PSA Peugeot Citroën and the French goverment have been negotiating how to repair the company's business position without ruining the new government's promises to the electorate. At last count, Peugeot wants to send 14,000 workers home for good, close a factory in Aulnay, and trim some of its 25% overcapacity. The automaker desperately wants to sell more cars to help it stop losing €200 million ($246M U.S.) per month. The government has already nixed the most drastic plans, but it needs to keep Peugeot from drowning at the same time as doing so saves jobs, encourages domestic car sales, and balances a nasty state budget. In addition, any maneuver needs to keep the EU's competition watchdog from intervening.

Dow Jones reports that the solution involves increasing cash incentives for EV and hybrid purchases and raising taxes on "high emission vehicles." France already provides a €5,000 subsidy for EVs and €2,000 for hybrids, but those will see a €2,000 bump to €7,000 and €4,000, respectively. The CO2 output or engine displacement that would qualify a vehicle as "high emission" isn't stated. Supplemental and longer-term plans include asking the EU to examine a free-trade agreement with South Korea that France says has resulted in a glut of South Korean cars, and providing €600 million in lifelines to smaller, struggling automaker suppliers.

From our perspective, the measures look like more of the same largely-useless pussyfooting that has kept Europe staring at the economic apocalypse for more than two years. In a New York Times article about Europe's "day of reckoning," Fiat and Chrysler CEO Sergio Marchionne said, "I've never seen it this bad. All the unresolved issues that have been plaguing the industry for a number of years have all come forward."

Austerity measures on top of the general European economy are keeping buyers away, and we have no idea how another €2,000 on the hood is supposed to spur enough demand for EVs and hybrids to help Peugeot and Citroën. Even if they tripled their sales numbers, they'd still be niche vehicles.

The problem right now is that in 30 days Peugeot will be another €200 million in the hole, and neither the company nor the government can allow that to continue, else they'll both be taking even bigger lumps soon enough.


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  • 26 Comments
      Blakkar
      • 2 Years Ago
      Here's something the French auto industry can do. Stop building so many cars you can't sell them all. Better to be a smaller company than none at all.
      • 2 Years Ago
      [blocked]
        • 2 Years Ago
        [blocked]
      steve_macdonald
      • 2 Years Ago
      Use taxpayer money to coerce people into buying overly complex, impractical EVs when all they really want is a Sonata. What could go wrong?
      Jim
      • 2 Years Ago
      Unfortunately for the French the giant shadow of VW looms over them. It will take an amazing vehicle to get them out of this mess when the Germans have almost every niche filled. That and VW can afford to be more competitive on the pricing since Audi makes up so much extra profit.
      Kahz
      • 2 Years Ago
      Honestly, I've yet to see a French car design that 'wow's me. Maybe they should work on that, along with pricing.
        Spellchecker
        • 2 Years Ago
        @Kahz
        A Citroen doesn't impress you in terms of design? What do you find sexy and stylish? A Corolla?
          • 2 Years Ago
          @Spellchecker
          [blocked]
          spw
          • 2 Years Ago
          @Spellchecker
          Citroen C1 is a Toyota actually... and very reliable.
      throwback
      • 2 Years Ago
      Europe's over capacity will not be solved as long as countries insist on no plant closures. I would not be surprised to see the EU impose harsh tariffs on non EU car imports. There is a reason French people are buying Korean cars, value for money. The only way to stop that is to keep the Koreans out since the government insists on no plant closings. Reminds me of GM and Chrysler stock piling cars because it was too costly to shut down a factory.
        Val
        • 2 Years Ago
        @throwback
        Import tariffs will just mean more korean cars made in slovakia and czech republic. Poland, romania and hungary are also in the EU, all ready to do anything to attract korean, japanese or even chinese factories.
      Val
      • 2 Years Ago
      Those incentives are actually only for french-made vehicles, which is probably against some EU policy, and the complaint about korean imports is totally populistic. Hyundai and Kia have huge factories in slovakia and the Czech republic, which are part of the EU and the common market. If anything, they will shift even more model production to europe, and screw the french even more. Just like the US thought they are very smart when they imposed import taxes on the japanese and made them just build factories in the southern US. That sure saved the big three...
      scott3
      • 2 Years Ago
      The key for Europe now is to focus on cheap, quality cars. People will need cheap and reliable transportation. Save the science experiments till they get back on their feet. The French goverment needs to keep their money as they will need it as the Germans will not bail them out. The French and everyone else in Europe need to start cutting cost as everytime there is a money collapse it often ends in a war. What is it with goverments including our own that think they can spend their way out? Seldom do they do what they need and cut spending.
        LW
        • 2 Years Ago
        @scott3
        it was the massive austerity and payback demanded on the Germans after WWI that caused N4zis to arise. Then it was the stock collapse in the US, which caused the massive withdrawl of capital from Germany back to the US which permanently cemented Hit1er to power. What does these events remind you of?
          LW
          • 2 Years Ago
          @LW
          A P, Did I say the start of war? I said the extreme reparation demanded by the winning nations after WWI, leading to the rise of Hit1er and his nationalistic scapegoating ideology, then the subsequent event (global finance and free flow of capital) the caused the demise of Weim4r republic and cementing the N4zis to power. Why do you think the idea of forced reparation by the losing nation were not a popular idea after the end of WWII? It became the winning nations putting massive amount money into rebuilding the losing nations.
          LW
          • 2 Years Ago
          @LW
          A P, here is a tiny bit of info on the great depression and capital outflow from germany back to their home countries in order to shore up their own books. This sounds familiar? http://en.wikipedia.org/wiki/Great_Depression#Germany You can dig up Treaty of Versailles creating the support for N4zis, with historians even saying it is the cause WWII. And nobody is apologizing for germany. In fact, modern Germany is making the same demands from Greece, and you can see the rise of f4cist parties in Greece that does the same scapeg0ating as the N4zis did.
          A P
          • 2 Years Ago
          @LW
          Apologize about the Germans much? The real cause of the war was not marching to Berlin in 1918. That would have ended the "stabbed in the back BS rumor" that the Nazis liked to promote. The other items you talked about fanned German nationalism but did not "cause" anything but the basic sickness of early 20th century German pride to arise twice in a generation.
      Val
      • 2 Years Ago
      There are of course many voices saying that the CEO and executives should cut their own salaries and bonuses, but the reality is that it won't really make any difference, even if they worked for $1 a year.
        LW
        • 2 Years Ago
        @Val
        You understanding of how corporations work is very naive. CEO & executives are paid by the board...the board's interest is to maximize 'shareholder's value'...e.g. maximizing profit to the bone....at the expense of everything else. If the CEO and executives could deliver that, they are handsomely rewarded...thus the birth of the seeing what they could cut and juggling the numbers quarter to quarter. Shareholders are not mom & pop with their share of 20 stocks, but megafunds holders that has enough shares to have someone on the board who's only interest is to maximize the return for the fund mgr. If they don't perform to expectation of these megafund mgrs, the megafund investors will just pull their money out and put it into shares of a corporation that was better at cutting cost to the bone. So all modern corporations are at the mercy of modern day megainvestors and if you don't treat workers as nuisances with the goal of minimizing that part of expense down to $0, you will not survive.
      Tweaker
      • 2 Years Ago
      Another solution might be to build better cars.
        SloopJohnB
        • 2 Years Ago
        @Tweaker
        Not likely when losing Euro 200M per month. Or with socialized French workers.
        tinted up
        • 2 Years Ago
        @Tweaker
        Another issue is that a lot of governments work to make their local industries succesful in the export business. Japan practices this as does Korea and China. It seems like the veterans in the industry (USA, Canada, and Europe (not including Germany)) don't want to level the playing field with their Asian competitors. Especially when you have a free trade agreement with a competing country it is absolutely imperative that you match their attempts to manipulate their monetary base. A huge problem with the Euro zone is that different nations are operating with the same currency but have much much different economic climates and ratios of imports to exports. I am sure I am preaching to the choir here but the Euro-zone is bound to fail, or at the very least get paired down to nations with similar GDP.
      Duk3ofN3rd5
      • 2 Years Ago
      Shouldn't Hybrid four be shorten to H IV?
      SloopJohnB
      • 2 Years Ago
      Wow. Euro 200M per month? Toast unless France simply bails out Peugeot. This is a Euro multi-Billion issue, not just a few hundred million. The unfortunate situation is that it looks like the owners of Peugeot will get the benefit and another year or so of peons scratching at the motherly teat of the French automotive industry before Peugeot is allowed to do what it should have been all along...cut workers, close the factory, and trim the overcapacity. If Peugeot had a decent car to sell, notwithstanding the economy, it wouldn't be so bad. But this is not going to end well. Or soon.
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