Peugeot plunges into record EUR 5.0 bn loss in 2012
(PARIS) - French automaker Peugeot Citroen reported a record loss of 5.0 billion euros on Wednesday but said it was on the road to recovery from crisis, and the government insisted that nationalisation is not on the agenda.
PSA Peugeot Citroen, the biggest French carmaker and Europe's second-biggest after Volkswagen, shocked France in the middle of last year when it announced huge job cuts and a plan to shut a plant near Paris.
But in announcing its annual results, the group said it had built the foundations for recovery after cleaning up its balance sheet and implementing a tough restructuring plan.
Peugeot blamed the results on a previously announced asset writedown of 4.7 billion euros last year and on the crisis in the European car market.
The loss compared with a profit of 588 million euros in 2011, while revenue for the year fell 5.2 percent to 55.4 billion euros.
"The Group's 2012 results reflect the deteriorated environment in the automotive sector in Europe," Peugeot head Philippe Varin said in a statement.
But he added: "The foundations for our rebound have been laid."
Investors appeared to believe this as the company's share price soared over seven percent to 6.40 euros in late afternoon trade.
The results were worse than forecast by analysts and overshadowed the previous record loss of 1.2 billion in 2009.
The operational loss for 2012 stood at 576 million euros, sharply down from a one billion profit in 2011, with net debt at 3.0 billion euros, the company said.
The dire state of finances at the privately owned company has prompted some talk of nationalisation in order to rescue one of France's most iconic companies and biggest employers from catastrophe.
But French Finance Minister Pierre Moscovici firmly dismissed the possibility saying it was "absolutely" not relevant and that it was up to Peugeot management to implement its recovery plan.
But Budget Minister Jerome Cahuzac said it was impossible to "remain insensitive to this very great company's fortunes."
Last year the newly installed government of Socialist president Francois Hollande agreed to shore-up Peugeot's financing arm with a six-month 1.2 billion euro guarantee which the European Commission authorised on Monday.
The company's auto division has been burning through cash at a rapid rate, as much as 200 million euros a month in the middle of last year, and ended the year with a negative cash flow of 3.0 billion euros.
In announcing its huge writedown on assets last week, the company said it would reduce that negative cash flow by half over 2013 with a return to balance by 2014.
PSA Peugeot Citroen, which has a strategic tie-up with General Motors (GM) of the United States, is in the midst of a restructuring involving deep job cuts.
The plan involves the loss of 11,000 jobs between 2012 and 2014 and the closure of a plant in Brittany and another northwest of Paris.
Chief financial officer Jean-Baptiste de Chatillon told a news conference on Wednesday that Peugeot would improve its image as it pushed into growth markets such as China, Russia and Brazil where Volkswagen and others have already made huge headway.
It would also seek to rationalise its range of products so that brands Peugeot and Citroen would no longer compete on the same market, the company said.
Peugeot -- much like its mid-market competitors such as Opel, Fiat and Renault -- has struggled to find a place on the auto market between the high-end players from Germany and new low cost entrants from South Korea such as Hyundai and Kia.