French reaction to Dongfeng's stake in PSA is ambivalent

Workers make final inspections of a Peugeot 3008 compact SUV on the production line at a plant operated by Dongfeng Peugeot-Citroen Automobile Ltd, in Wuhan, China. Dongfeng is acquiring a 14.1 percent stake in the French automaker for $1.09 billion. [Tomohiro Ohsumi / Bloomberg]

The long-awaited tie-up between French automaker PSA Peugeot Citroen and its Chinese partner, Dongfeng Motor Corp, has generated a mixed reaction in France as the deal is widely seen as the end of era — the Peugeot family's dominance of one of France's largest and oldest companies.

At a press briefing in Paris on Wednesday, the first question posed by journalists to the members of PSA's managing board was about the future role of the Peugeot family and the possibility of the company turning into a "semi-Chinese" group.

Philippe Varin, chairman of the managing board of PSA, responded by saying that the company will continue to capitalize on its image as a French brand and that there is no possibility of its losing its Gallic identity.

France to inject $1b in Peugeot

Peugeot family approves draft Dongfeng deal

To ensure this, the French government has injected an equal amount of capital into the company.

There was an emotional moment when Varin introduced Carlos Tavares, who will replace him as president of the PSA's managing board in March.

"We have seen a very difficult situation in the industry and in the group, and we have gone through tough and sad moments. But now we are given a new partnership and new financial means to achieve growth and to realize our ambitions," Varin said.

For Tavares, who is Portuguese, the injection of 800 million euros ($1.1 billion) from Dongfeng, which now owns 14 percent of PSA's stake, is an opportunity for PSA to transform itself from a European-focused company into a truly global automobile manufacturer.

"I don't see it being locked up in a bipolar entity or simply a Franco-Chinese entity," he said.

Tavares used the analogy of "back in the race" to describe the ongoing reform and restructuring of the company, which he predicts will become a true global player in the world's auto industry.

Alhough concerns remain about negative impacts arising from globalization and the potential relocation of French factories to emerging markets such as China, the arrival of Dongfeng's capital was generally welcomed by the French public and media.

The deal was widely viewed as timely financial support that will help bolster the company's balance sheet and cash liquidity as well as its future expansion into Asia and Latin America.

"I think the partnership with Dongfeng will be beneficial for the company as there is no better solution," said one senior French journalist. "We would rather have an alliance with a major Chinese automaker than with some European companies — for example, the German ones," he added.

French politicians from both the left and right have voiced fears about sacrificing jobs and the possible closure of local factories at home as a result of Dongfeng's acquisition of PSA.

"The factories will naturally go to where the markets are. It is inevitable, especially when the European car market is slumping while the Chinese one is growing very fast," said the French journalist, who asked that his name not be disclosed.

But Tavares said the company is planning to modernize the industrial equipment of its works and the overall manufacturing capability of its French plants in order to avoid jobs being lost domestically.

"It is an opportunity for us to improve growth momentum and competitiveness through modernization as we have the means to achieve it and to survive," he said.

 

More Peugeot and Citroen pictures:

France's Industry Minister inspects Peugeot 2008	China-exclusive new Citroen DS 5LS sedan