France's giant auto manufacturer PSA Peugeot Citroen on Wednesday announced billion of euros of guarantees to beef up its finance arm PSA Finance Bank, a move to improve its financial assets and reduce planned job cuts.
"The Banque PSA Finance banking pool has been requested to provide a total of 11.5 billion euros (14.88 billion U.S. dollars) in cash facilities, of which 1 billion euro in additional liquidity," the group said, adding that the main credit facilities have been renegotiated, with drawdowns possible over the full 2013-2015 period.
As part of the plan, the government will provide 7 billion euros in refinancing guarantees for new bond issues and appoint government and worker representatives to group's board with the aim to offer more liquidity to the bank and provide cheaper loans to car buyers.
In face of weak competitiveness and high operating losses set at 700 million euros "the financing of the Banque PSA Finance should be reinforced to the benefit of the Group, its customers and the entire French automobile industry, including the dealer networks," PSA noted on its website.
In this context, the French auto manufacturer decided no to pay dividends as long as the state guarantee is in effect, pulling its shares down by 3.66 percent to 5,62 euros at mid day trading session.
"We do not offer gifts to the group. The government's aids to the companies are necessary provided they are translated into investment and employment," French Prime Minister Jean-Marc Ayrault told France Inter radio.
"The deterioration of group's note makes the bank ... unable to seek for liquidity on markets. So, there is a great responsibility to not drop the sector," he added.
Few months ago, French leading car maker said it will cut 8,000 jobs in France as part of a restructuring plan to compensate for losses and poor demands in the European market.
In a separate statement released on Wednesday, PSA reported 3.9 percent decrease in third-quarter revenue to 12.93 billion euros with automative division falling by 8.5 percent driven down by poor European demand. (1 euro = 1.294 U.S.dollar)