TMW - The downfall of the PSA Group, or the start of something better ?

If the rumour mongers are to be believed, then it looks like the PSA group, or Peugeot and Citroen to the rest of us, are running out of money, and very quickly, and they are relying on minority shareholder General Motors to bail them out.

It has been reported elsewhere that the money could dry up as soon as the year end and the major stockholders, the Peugeot family, have initially offered to stand down and agree to allow General Motors to take over the company, the company has reportedly burned through three billion euros in operating cash last year, and this is a figure that can not be sustained.

General Motors currently operated three big brands in Europe, Vauxhall for the UK market, Opel for the rest of Europe and Chevrolet that is marketed everywhere, so will the General step into the breach and have two more huge brands to add to its arsenal.

Since General Motors invested in PSA last year to the tune of 7% they have tentatively agreed to share engines and platforms for new models including the new Peugeot 3008, Vauxhall/Opel Zafira and Citroen C3 Picasso

Former Peugeot GB managing director and now executive vice-president of corporate communications, Jon Goodman, told Reuters: ‘We don’t comment on speculation or rumours.”

However all the brands are suffering from major over capacity, and should the general step into PSA's boardroom as boss they will be requiring cuts that will not sit well with the French government, and in particular French President Francois Hollande, who will undoubtedly be a key player in any decisions that will be ultimately made.

But whatever that outcome it has got to work, or PSA could go bust, and that would be worse for the French government, after all there are 77,000 directly employed at PSA, and countless 1,000's of associated jobs.

It has been noted that the Peugeot family had already asked the Chinese auto company, Dongfeng, for financial support, but after much negotiation these talks failed, and in a direct comparison to the downfall of MG-Rover back in 2005, the family must be thinking that this situation may well end up the same way and it looks like the General Motors discussions may be the last chance for them to avoid, what will be the biggest auto failure of all time.

According to Reuters, General Motors are "playing hardball" in waiting to be assured that that is can make all the necessary cuts in plant and jobs at what they call "reasonable cost", no jobs or plant closures can be classed as reasonable, but if it is a case of plant and job cuts against total closure, then surely the cuts will be the best way forward, either way no decision will be made before the German elections in September, so as to avoid the fall out from any issues that may arise in Germany.

As it looks, the General is on an upward swing, if you ignore the sales figures,they have the new ADAM, Cascada and Mokka, along with a mid life refresh of the Insignia and the new Corsa due imminently, Citroen have a number of refreshed models as well as the new C4 Picasso and Grand Picasso, Peugeot has the stunningly beautiful 208 and 2008, along with refreshed RCZ, it seems as though PSA are relying heavily on the 208/2008 to turn things around, and so far the sales of these models have proved fruitful.

The 408 has failed miserably to live up to it's hype and sales are no where near as good as the original 405/6/7 which finished production in 2011 and 4.5 million units against 125,650 for the years 2010/11 for the 508, and it is this model that replaced two segments namely the large family car and executive car markets, the 508 has been a failure in the UK market with sales bordering on the non existent compared to the original 405.

Neither the PSA or the General are having a great time in Europe, with the General suffering to the tune of a 11% drop in sales against 2012 for the first five months of the year and PSA an even worse 13.9% drop, so will the general invest, yes i think they will, PSA has invested heavily in the new 208/2008 and they are reaping the rewards now, but they failed to make sure that the income matched the out goings, and in doing so they are likely to lose their Independence, and that may not be a good thing for the French company.

Report by J.Mower