Peugeot may need to raise funds as burns cash -sources

PSA Peugeot Citroen may have to raise funds through a share sale as the loss-making French carmaker burns through cash in a weak market, two sources familiar with the situation said.

Peugeot, which has been running losses of up to 200 million euros (HK$2.0 billion) a month and does not expect a return to profit until 2015, said a capital hike was not on the agenda, as it started talks with unions about turning around the firm.

However, one of the sources said Peugeot’s financial situation had deteriorated to the point it would need to raise cash in the coming weeks or months, and that a capital increase or asset sales were possible in the near future.

“The situation is extremely difficult, the company is still burning cash like crazy, its credit rating is horrible and it’s increasingly difficult to access banking lending,” the source told Reuters on condition of anonymity.

Carmakers have been hit hard by a plunge in demand in recession-hit Europe. Peugeot has suffered more than most, in part because it makes fewer sales in faster-growing emerging and luxury markets than many rivals. The group is cutting thousands of jobs and closing a plant near Paris.

The second source, who also declined to be identified, said a capital increase was not imminent, but would be needed if Peugeot was unable to meet its targets.