Ailing French carmaker PSA Peugeot Citroen yesterday said it would have to write about 1.1 billion euros (US$1.5 billion) off its full-year earnings, hurt by worsening markets and unfavorable exchange rates in Russia and Latin America.
“The impairment charges, which may represent around 1.1 billion euros, will reduce consolidated results by the same amount but will not involve any cash-out,” the company said.
Peugeot lost 426 million euros in the first half of the year alone, as sales in its biggest market — Europe — collapsed.
The group had been looking to other parts of the world, such as China and Argentina, for growth, but it said that current exchange rates were unfavorable.
A 1 percentage point change in the euro against other currencies, including the Brazilian real, the Argentine peso and the Russian ruble, will have “an impact of around 80 million euros on Automotive Division recurring operating income based on current market conditions,” the carmaker said.
It also confirmed that it was in talks with China’s second-biggest carmaker Dongfeng Motor (東風) about a potential capital injection, bur stressed that there has not been any agreement on a transaction and that the talks were at a preliminary stage.
Dongfeng already has a joint venture with Peugeot in China and rumors have been swirling for months that the two were in talks about a possible cash injection in the loss-making French group.
In October, Dongfeng said it was studying the “rationality” of coming to the aid of Peugeot.
In a separate statement, Peugeot said General Motors was ready to back the entrant of a new shareholder in the French group.
The US company, which holds about 7 percent of the French group, would “vote any PSA shares it would hold in favor of any such transaction,” Peugeot said.
About one-quarter of PSA shares are held by the Peugeot family.