French Minister Insists Investment From Chinese State-Owned Automaker Dongfeng Doesn’t Make PSA Peugeot Citroen Any Less French

on October 22 2013 11:39 AM
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An employee checks Citroen C5 car components at a factory of Dongfeng PSA Peugeot Citroen Automobile Company Ltd in Wuhan, Hubei province January 11, 2011. Dongfeng, already a partner with PSA in China, could end up soon with a 20 percent stake of the troubled French automaker. Reuters

Talks that could lead to France's PSA Peugeot Citroen SA (EPA:UG), Europe’s second-largest carmaker by market share, being partially owned by Dongfeng Motor Corporation, China’s second-largest auto company by volume, has France's government on the defensive about the implications of such an investment for the beleaguered 213-year-old Gallic icon.

The possible Chinese investment raises hackles among French who perceive the investment as a first step toward sending auto manufacturing jobs eastward. General Motors Company (NYSE:GM), for example, already makes cars in China for markets in Southeast Asia and South America. 

French Minister of Industrial Renewal Arnaud Montebourg was forced to clarify his initial public statement about the potential deal.

"I didn't say [there would be no Chinese investment]. What I'm saying is that the company will stay in France and will remain French,” Montebourg said in an interview with French-language Le Parisien on Tuesday.  “PSA is a company in serious trouble. The aim is that a manufacturer that employs 100,000 people in France recover and return to hiring.”

Earlier this month PSA said it was considering a deal that would inject $2.4 billion into the maker of the 208 GTi performance hatch and Citroen C5 Salon and leave the French government and Dongfeng each owning about a 20 percent stake in PSA. The deal would also wrest control of PSA from the Peugeot family by diluting their stake and voting rights.

Wuhan-based Dongfeng and the French automaker are already partners in manufacturing and marketing PSA brands in China. PSA has been hammered by the European auto sector crisis, which is suffering from overcapacity and labor laws that make it difficult and costly to shut down plants.

Dongfeng became a possible buyer after General Motors, which bought 7 percent of PSA early last year, backed out of a closer collaboration through GM’s Opel division, citing political concerns that reflect the U.S. government's partial ownership of GM. The Dongfeng-PSA deal would reduce GM’s stake in PSA.

Montebourg made waves earlier this year by blocking U.S. search engine Yahoo’s acquisition of Paris-based video sharing site Dailymotion and clashing with American auto-tire magnate Maurice Taylor over Taylor’s disparaging comments about French workers.

In February Taylor said he would have to be stupid to take over a Goodyear tire factory in Amiens, France, with its “so-called workers.” But on Tuesday Montebourg confirmed that Taylor is offering to save a quarter of the 1,200 workers in a deal that will be negotiated with unions on Wednesday.

Montebourg has been dubbed by the British media as a protectionist in the wake of his decision to block the Yahoo deal and because he wrote a treatise on reindustrializing France and reinvigorating the “Made in France” label. 

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