France Mulls Taking PSA Stake

The French government is considering a plan to aid PSA Peugeot Citroen by buying an unspecified stake in the ailing carmaker.

Budget Minister Jerome Cahuzac tells Paris radio station RMC that PSA "must not disappear." He insists France will do whatever is necessary to save the company, including a possible share purchase by the country's sovereign wealth fund.

France is already the largest shareholder of the country's other domestic automaker, Renault SA, in which it holds a 15% stake.

But Prime Minister Jean-Marc Ayrault tells reporters buying a stake in PSA is not on the agenda because the company has not requested it.

France obtained a seat on PSA's board after agreeing in August to guarantee €7 billion in loans for the company's finance arm, Banque PSA Finance. The EU is reviewing the deal.

PSA sold a 7% equity stake to General Motors Co. last March as part of their newly formed purchasing and product-development alliance. The Peugeot family also owns 25.3% of PSA (a 37.9% voting stake).

The automaker's financial woes are deepening. PSA disclosed on Thursday that it will book a €4.1 billion charge to 2012 results to reflect the deteriorating value of its auto assets. A union leader said last week that the company is losing €7 million per day.

France is anxious to preserve as many of PSA's 100,000 domestic jobs as possible. Analysts warn that government ownership could slow the company's efforts to restructure and delay its return to profitability.

PSA aims to shutter an assembly plant near Paris and shed 9,500 jobs in France by next year.