Bad news from Ford and Peugeot and good news from VW

Today we bring you some good and bad news from the motor industry.

Today French carmaker PSA Peugeot Citroen announced it is looking for €11.5 billion in new financing after reporting another fall in car sales.
The company said it was near to a deal with its banks and the French government to extend financing for its lending arm, Banque PSA Finance.

It reported revenue in the third quarter down 3.9% on a year ago.

Peugeot’s shares fell 6%, as the carmaker will not pay dividends while in receipt of government aid.

The government is offering €7 billion to Peugeot, the carmaker said, and the bailout period is expected to last for about three years.

The French car sector is high profile and politically sensitive. Unemployment in France is over 10% and the government has emphasised the importance of industry jobs.

Both government and workers will have a seat on a Peugeot oversight board.

French Prime Minister Jean-Marc Ayrault said on the French radio station France Inter: “My government has no intention of just giving, of offering a gift without anything in return.”

This comes just a few years after the huge $85 billion bailout US President Barack Obama made to General Motors Co. and Chrysler Group LLC between 2008-2010.

Unfortunately, more bad news came from the US car industry today when Ford announced it would be closing its factory at Genk in Belgium with the loss of 4,300 jobs to cut costs.

Workers at a Ford assembly plant gather during an emergency meeting with the plant management in Genk

The company is looking to close the factory – which makes the Mondeo and S-MAX minivan – in 2014.

The move follows a warning from Ford last month that it would be cutting jobs in Europe amid falling demand for motor vehicles.

Ford said its European operations could suffer losses of $1bn (£630m) this year.

Stephen Odell, chairman and chief executive of Ford Europe, said: “The proposed restructuring of our European manufacturing operations is a fundamental part of our plan to strengthen Ford’s business in Europe and to return to profitable growth.”

He added that the company understood the impact the potential action would have on the workforce and those connected to them and said that, if the restructuring plan was confirmed, it would will put in place measures and support to lessen the impact for those affected.

The company wants to reduce labour costs and improve plant utilisation in Europe. The region accounts for 25% of Ford’s sales, but industry watchers say it uses less than 65% of its capacity there.

Union representative Luc Prenen said that Ford would transfer production of the new versions of the Mondeo and S-MAX marques to its plant in Valencia in Spain.

The Genk plant was expecting to start producing the new Mondeo in October next year.

But it’s not all doom and gloom as today The Volkswagen Group reported it has increased its sales revenue to €144.2 billion in the first nine months, up 24.0 per cent on the prior period from January to September 2011 (€116.3 billion).

They reported that this was due mainly to higher volumes and in particular the consolidation of MAN and Porsche.

The consolidated operating profit for the first three quarters does not include the €2.8 billion (€1.9 billion) share of the operating profit of the Chinese joint ventures. These companies are included using the equity method and are therefore reflected in the financial result. The updated measurement of the put/call rights relating to Porsche, as well as the re-measurement of the existing stake held at the contribution date also had a clearly positive effect on the financial result. As a result, profit before tax after nine months amounted to €23.0 billion (€16.6 billion) – an increase of 38.0 per cent as against the prior year period. The figure after tax improved by 47.7 per cent to €20.2 billion (€13.6 billion).

Lets hope we expect more good news like this soon.

Andrew Kirkley
Latest posts by Andrew Kirkley (see all)
  • 24th October 2012

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