Struggling French automaker PSA Peugeot Citroën has been thrown a lifeline in the form of capital injections from the French government and Chinese automaker Dongfeng. Each party will offer 800 million euros (approximately $1.1 billion) for 14 percent stakes in PSA. The French automaker also plans to raise additional capital through a 1.4 billion euro ($1.9 billion) share rights issue. The new capital will mostly be used to pay off high-interest debts and fund the development of new vehicles.
In the process, the Peugeot family, which has controlled the company since its formation almost two centuries ago, back when it was a manufacturer of goods such as pepper mills and bicycles, will finally give up control. In the deal, the family’s holdings will be reduced from a current 25 percent to 14 percent, meaning no one party will have a large enough stake to override decisions.
PSA remains Europe’s second-biggest automaker but has been bleeding billions in cash over the past couple of years. In 2013 it lost close to 2.3 billion euros ($3.15 billion) and in 2012 the losses totaled almost 5 billion euros ($6.87 billion). Prior to its latest deal, PSA attempted to form an alliance with General Motors, but the American auto giant pulled out of the deal last December
. The two will still develop some models together.
PSA chairman Thierry Peugeot is believed to have been against the new deal with Dongfeng and the French government, and will be stepping down from his position as chairman. Most, however, are in support of the deal as it is expected to provide PSA with greater access to markets in Asia. PSA and Dongfeng already have several joint ventures to produce Peugeot and Citroën cars in China._______________________________________Follow Motor Authority on Facebook, Twitter, and Google+.