EU Commission approves PSA Peugeot Citroën restructuring loan

August 1, 2013: PSA Peugeot Citroën has received a financial helping hand from the French government to assist its recovery plan. The EU Commission has ruled that 571.9 million euros (Rs 4,618 crore) of restructuring aid that the French government is offering to struggling PSA Peugeot Citroën doesn't contravene European state aid laws.

The decision, made yesterday, came after an in-depth Commission investigation into whether the financial aid would distort the new car market or unfairly affect PSA Peugeot Citroën’s rivals that are not receiving such help. The Commission said the restructuring plan, together with undertakings made by the French authorities, will enable the PSA Group to return to viability.

" This is a balanced result which offers the PSA Group the chance to make a new start on a sound basis," said Joaquín Almunia, vice-president of the EU Commission with responsibility for competition policy.

Last summer PSA laid out a restructuring plan that involves measures such as halting production at its Aulnay plant and cutting more than 11,000 jobs across its businesses.

As part of the restructuring aid, PSA Peugeot Citroën will receive a repayable advance of 85.9 million euros (Rs 693 crore) to implement its '50CO2Cars' R&D project, which is focused on producing low-emissions vehicles and engines. Another part of the aid deal stipulates that the PSA Group will have to contribute to the cost of its restructuring through a sale of assets.

PSA Peugeot Citroën's mid-year financial results, issued yesterday, suggest that its alliance with General Motors and the raft of cost-cutting measures implemented over the past 12 months are beginning to have a positive effect on the group's health. Strong car sales in China, where Peugeot Citroen enjoyed a 33 percent YOY sales increase, have helped to offset the continuing stagnation of the European market. Meanwhile, problems at PSA have already impacted plans which are apparently on hold. The company has reportedly surrendered its right to a 600-acre tract of land at Sanand, Gujarat where it had plans for a 170,000 unit plant at an investment of Rs 4,500 crore.