Dongfeng upsets Peugeot cash call

PSA Peugeot Citroen's plan to raise funds through a share sale have hit a snag as Dongfeng Motor now wants a smaller stake than first discussed, said people familiar with the matter.

Dongfeng was weighing buying about 10 per cent of Peugeot, half the size of the original proposal, they said.

The mainland company was more interested in expanding an existing industrial venture than buying a stake, they said.

Peugeot, Europe's second-largest carmaker, initially proposed a capital increase of at least €3 billion (HK$31.2 billion), in which Dongfeng and the French state would take equal stakes of about 20 per cent, sources said last month.

Peugeot, which reported a first-half operating loss in its automotive unit of €510 million, is looking to raise money for development spending and to expand outside Europe, where demand is at a two-decade low.

"Peugeot's issues today are so global that having Dongfeng buying 10 per cent of its shares won't change anything," said Florent Couvreur, an analyst at CM-CIC Securities in Paris. "Peugeot has to deal with restructuring its European activities; its synergies with GM, which are non-existent; the inconsistency of its product range; and its huge operational problems."