EU Temporarily Clears French Aid to Banque PSA

The European Commission's anti-trust authorities have given permission for the first €1.2 billion of the French government's proposed €7 billion in loan guarantees to PSA Peugeot Citroen's finance unit.

But officials in Brussels have decided the guarantees to Banque PSA Finance also constitute support for the entire company.

Therefore, to obtain final approval for the rest of the loan guarantees, PSA is required to submit a full restructuring plan for its automaking operations to the EC within six months. The company says it expects a final decision from regulators by this summer.

Brussels says PSA and its lending unit must show they can return to profitability without state aid. PSA also needs to ensure that loan guarantees won't give it an advantage that would distort auto competition.

EC anti-trust officials can demand a range of restructuring actions from an aid recipient such as PSA. Those can include requiring assets sales, business diversification or withdrawal from money-losing operations.

The turnaround the company unveiled last year includes eliminating 6,000 jobs across Europe and an additional 8,000 positions in Europe this year. Under the plan, PSA would shed another 1,500 jobs through attrition and close a factory near Paris in 2014. Since last year the company has sold more than €1.6 billion in assets.