Peugeot Decides to Pass on Mitsubishi Investment

By Brendan Moore

PSA/Peugeot-Citroen, who had been considering taking a 30%-50% stake in Mitsubishi to the tune of as much as 300 billion yen ($3.4 billion USD) announced at the Geneva Auto Show a couple of days ago that they were going to take a pass on the investment.

The deal would have given the Japanese automaker a timely infusion of capital; Mitsubishi has been floundering in the market lately and could use the money. Peugeot could certainly have used the expansion into other geographic markets that a tie-up with Mitsubishi would have afforded. Peugeot, the second-largest European automaker behind VW, has seen the writing on the wall in terms of the stagnating European market, and needs to be able to sell its cars in more places.

Philippe Varin, CEO of PSA/Peugeot-Citroen, stated that Peugeot was only interested in a deal if it created real value while synching up with Peugeot’s global strategy. It is widely known that another condition of the deal from Peugeot’s perspective would be that the Peugeot family’s 30% stake in the company remain undiluted, thereby ensuring control of the company would remain in their hands.

Varin stated in Geneva that the company’s terms for a deal had not been met. “In terms of our debt and our borrowing power, the priority has to remain our financial health,” he said.

Both companies have experienced a drop in sales recently in the current recession.

The two automakers had announced a few months ago the launch of discussions to form a strategic partnership in order to build on existing shared vehicle platforms such as SUVs and electric cars, and Mitsubishi told reporters a capital alliance could be a component of that agreement.

In light of the failed investment, Peugeot spokesman Laurent Cicolella stated that the French company was now focusing on Mitsubishi’s platform for “entry-level cars, especially for emerging markets.”

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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