Recently, the finance arm of PSA/Peugeot-Citroën was in such debt trouble that it was pricing itself out of the car loan market. The rates it was paying to service its debt, which was rated one step above junk, were so high that it was forced to charge car-buying customers higher rates than they could find elsewhere. This was adding to Peugeot’s already impressive woes by sending revenue out the door to competitors.

Two months ago a deal was worked out with the French government whereby the state would provide 7 billion euro ($9 billion USD) in bonds to guarantee the finance arm’s loans. The French government could nominate someone to join the Peugeot board, Peugeot would guarantee more French jobs, and on top of that deal, other banks would provide non-guaranteed loans. The government would take no equity stake in the car company.

Although not yet finalized, the arrangement is meant to create some breathing room for Peugeot Finance to lower its interest rates for customers, and a government-nominated board member, Louis Gallois, was recently named to Peugeot’s supervisory board. The arrangement was also openly questioned by at least three competitors: Ford, Renault – which is 15-percent owned by the French government after it received state aid – and the German state of Lower Saxony, itself a 15-percent shareholder in Volkswagen.

Now the European Union, responding to “an unidentified Peugeot competitor,” has challenged the terms of the deal, calling it state aid, which is a no-no. There was a lot of parsing-of-words at the time the potential deal was announced: Peugeot said it wasn’t state aid, it was state support; Ford of Europe said it didn’t think government support of companies was sustainable, making no mention that Ford Credit did receive federal aid at the beginning of our own economic crisis; and the irony of Renault and the German state’s complaints was apparently lost in their outrage.

The EU has requested official notification of the deal, which is the prelude before Brussels begins a full investigation into the matter, and that could raise the cost of the deal. The government doesn’t think an investigation is warranted since the funds only go to the finance arm and the loan is being made at market rates. Peugeot, on the other hand, has apparently been prepared for such an eventuality and is working with Brussels on the matter. The deal, if it closes, should be concluded early next year.

By Jonathon Ramsey

Related Posts


NHTSA launches investigations into Ford Crown Victoria police cars, Dodge Viper and Porsche 911

Posted on 23 October 2013

Reuters reports that the National Highway Traffic Safety Administration is investigating certain Ford Crown Victoria, Porsche 911 and Dodge Viper models for potential defects. NHTSA is currently looking into 2005-2008 Crown Victoria police car models ...


Watch the Hennessey Ford GT makes its record run at Texas Mile

Posted on 22 October 2013

We said they'd probably be out with an official video, we did not lie. The Hennessey-powered camouflage Ford GT sat at one end of the runway at the Texas Mile sitting still. At the other ...


AAA Says Voice-to-Text Functions are Distracting

Posted on 22 October 2013

Hands-free technology might make it easier to text, talk on the phone, or look up directions while driving, but the AAA Foundation ...