France is offering a €7 billion ($9.1 billion) lifeline to PSA Peugeot Citroen, the carmaker confirmed on Wednesday alongside another drop in sales.
In return, the Socialist government is expected to demand a reduction in layoffs, hoping to blunt rising unemployment in a sector critical to the French economy. The government has made a point of trying to revive industry and save jobs in France, where unemployment struck 10.6 percent in August.
Under the rescue plan, Peugeot Citroen will not offer dividends during the bailout period, expected to last three years, and will not buy back its own shares. Both the government and workers will have a seat on an oversight board.
“My government has no intention of just giving, of offering a gift without anything in return,” Prime Minister Jean-Marc Ayrault said on French radio station France Inter.
It’s the first state intervention in the industry in France since a € 6 billion loan package to Peugeot Citroen and Renault in 2008-2009 when the French economy was reeling from a financial crisis that triggered a global recession.
But the European car industry didn’t undergo the dramatic overhaul that U.S. car bailouts prompted. Peugeot Citroen has struggled since, not least because Europe’s economy has struggled in the face of widespread debt problems.
In an attempt to rein in costs, the company has already announced its intention to close one factory this year and to lay off thousands of workers.
Figures on Wednesday illustrated the problems the carmaker is facing. Sales fell 3.9 percent in the third quarter to 12.93 billion from 13.45 billion in the same period last year. Automotive division sales were down 8.5 percent, hurt especially by a weakening European demand and the suspension of deliveries to Iran. Sales increases in China and Russia shored up the company, as has an expansion of the alliance with General Motors.
Peugeot and GM said on Wednesday they would develop a joint program that will make a small van for GM’s Opel and Vauxhall brands and serve as the basis for a compact crossover vehicle for Peugeot. They’ll also develop a new, low-emissions small car and work together on mid-size cars and small vans under both companies’ brands