PSA May Sell Faurecia Stake

PSA Peugeot Citroen may sell its 57.4% stake in parts maker Faurecia SA for €1.2 billion to €1.5 billion, according to Paris-based CM-CIC Securities.

The analyst report sparked a 3% jump in PSA shares to €6.38 on Monday. Investors were cheered because such a sale would raise badly needed capital for the carmaker, which said last summer it was burning through €200 million of cash per month. PSA raised €1.5 billion from asset sales last year.

Divesting majority ownership of the supplier also would allow PSA to shrink its €2.5 billion debt load by deconsolidating Faurecia's €1.6 billion in obligations.

But analysts warn that PSA also would lose the benefit of the supplier's earnings. Faurecia contributed €1.8 billion in profits to the carmaker in 2006-2012, Credit Suisse tells Reuters. PSA's core auto unit lost €1.2 billion during that period.

Analysts say PSA shares also were buoyed by speculation the French government might buy a stake in the ailing automaker. Last month France guaranteed €7 in bonds for PSA's finance arm. Finance Minister Pierre Moscovici told France Inter radio on Sunday that the country may need to "go further" to ensure PSA recovers from its "severe crisis."