, PARIS, Oct 24 – French auto group PSA Peugeot Citroen reported weak sales and rising debt, and waived dividends in return for state support on Wednesday, causing its shares to slump 7.48 percent.
The group, the second-biggest auto maker in Europe behind booming German group Volkswagen, has already announced 8,000 job cuts and a plant closure which the government wants pruned back.
The firm reported that sales had fallen by 3.9 percent in the third quarter and that it was waiving dividends for three years, the duration of 7.0-billion state guarantee for its credit arm.
The group also announced joint venture projects with its strategic partner GM of the United States.
The financial support for its credit arm BPF is intended in part to enable the group to leverage its assets, but the condition that dividends must be waived hit the group’s capitalisation hard.
In mid morning trading, shares in PSA Peugeot Citroen were showing a fall of 7.48 perent to 5.38 euros, the lowest for 26 years.
The group said that sales fell to 12.9 billion euros ($16.7 billion) in the quarter amid increasing competition and a weakening of the European market.
It warned that it now expected sales in Europe, its main market, to fall by 9.0 percent instead of 8.0 percent forecast previously.
And it expected its net debt to rise to 3.0 billion euros at the end of the year instead of 2.4 billion euros.
The group’s financial arm BPF announced that it would receive state guarantees totalling 7.0 billion euros over three years.
BPF said it had also obtained cash facilities from banks amounting to 11.5 billion euros of which 1.0 billion euros was an additional sum.
Group finance director Jean-Baptiste de Chatillon said that most of these credit lines had already been negotiated for 2013-2015.
“The state has announced its intention to provide its guarantee for refinancing in respect of new bond issues in the next three years, up to 7.0 billion euros,” he said.
This would enable BPF to leverage its assets and to launch a savings plan for savers in France, as the financial arm of French rival automaker Renault had done recently, he said.
The government said in a separate statement that another condition attached to the state guarantee was the creation of a monitoring committee on which the state, PSA and an independent administrator would sit.
A representative of the staff of PSA would also join the group’s supervisory board.
An independent expert brought in to examine the politically sensitive job cuts had found that restructuring was needed because of strategic mistakes going back 20 years and said that the group had failed to seize the opportunities of globalisation.
In a separate statement, the group announced a four-pronged programme for joint industrial projects involving new models with GM.