Dongfeng reviews PSA stake following share price drop due to Covid-19 coronavirus outbreak – report04/03/2020
Dongfeng Motor Group is reviewing its deal with PSA for reducing its stake in the French automaker following a sharp drop in share prices due to the coronavirus pandemic, Reuters reported.
The French automaker group of companies agreed late last year to merge with Fiat Chrysler Automobiles (FCA), which would effectively create the fourth-largest automaker by sales volume, and bring together a combined workforce of 400,000 staff. The two automakers signed a memorandum of understanding in December towards closing the merger in 12 to 18 months, Automotive News reported.
To facilitate this process, Dongfeng had agreed to lower its 12.2% stake in PSA by selling 30.7 million shares back to the French company. This stake was worth around 680 million euros (RM3.2 billion), and the share sale would leave Dongfeng holding approximately 4.5% of the merged PSA-FCA group, said Reuters.
The Chinese firm, however is reviewing the move, according to a Dongfeng official. “There are possibilities that the stake sale plan will change. We are evaluating the issue. This is closely related to (PSA’s) merger talks with FCA, so we are also in close talks with them,” said the official in an earnings call.
A document sighted by Reuters showed Dongfeng and PSA plans to cut jobs at the Dongfeng Peugeot-Citroen Automobile (DPCA) facility in Wuhan, and reduce its number of car assembly plants in order to make the joint venture more profitable, according to the report.
Last month, PSA stated that it is still committed to This is closely related to their (PSA’s) merger talks with FCA, so we are also in close talks with them merger deal with Fiat Chrysler Automobiles, following French media reports that the merger between the two automotive groups could be threatened by developing market conditions a resulting from the ongoing pandemic.
It was also previously reported that all five PSA brands and all nine FCA brands will be maintained after the after the US$50 billion (RM207.5 billion) 50:50 share merger.
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