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(Image Source: euronews)
BY KATIE BRENNAN ANCHOR MEGAN MURPHY
The EU gave the French
government permission Monday to help temporarily save carmaker Peugeot. CNBC Europe explains,
the government will back bonds to bail out a bank attached to the carmaker, which has
seen falling sales in a depressed European car market.
“The EU has temporarily
approved, this news just out, temporarily approved french aid to peugeot citroen bank.
In other words approving aid to the inhouse finance arm to the struggling french automaker
Peugeot.”
EuroPolitics explains the relationship between that finance arm, Banque
PSA Finance and its owner, PSA Peugeot Citroen.
“BPF is a 'captive' bank in that it finances only
the commercial activities of PSA Group, Europe's second largest automotive group. BPF provides
credit to buyers of cars manufactured by PSA and to its dealers.”
(AOC)
Because
of that connection, the Telegraph reports the bank is feeling the hurt in the European
economy.
“Global sales by France's biggest automotive company and Europe's second-biggest,
dropped 16% last year to below 3 (million) units, as the car maker fell victim to slumping
demand in Europe where the company makes about 60% of its turnover.”
Given its size,
the French government announced a rescue plan for BPF in October of last year. Now, the
government will back 1.2 billion euros, that’s about 1.6 billion dollars, worth of new bonds
to finance BPF. But it needed the European Union’s permission to do so first. And this
thumbs up is temporary.
A European Commission Spokesman told Euronews “We expect
France to notify us of a restructuring plan, not just for the banking arm but for the whole
PSA group, because this aid also benefits the whole group.”
France has to get
that plan to the commission in the next six months. The commission would then review it
and make a final decision on the aid. Bloomberg explains there are still other rescue options
available.
“The French papers full over the weekend whether or not the French
government would ultimately have to step in and buy a chunk of this business. That story
still not off the table and still very much ongoing.”
It’s not clear how deeply the company will have to restructure to gain further EU approval,
but the struggling carmaker is already cutting 8,000 jobs and closing a major assembly plant.