Peugeot Citroen halved losses last year, the car giant announced on February 19 along with a shareholder tie-up with China's Dongfeng and the French state ending one of France's oldest industrial dynasties. The shareholder deal, tied up on February 19, means that Peugeot Citroen will raise at least 3.0 billion euros ($4.13 billion) of new capital with the issue of new shares.
The stricken group, counting on the Chinese market and new hybrid compressed-air technology, revealed the biggest steps so far in its strategy to climb out of a crisis which brought it close to disaster. Net losses last year still amounted to 2.3 billion euros, but that was less than half the figure of 5.0 billion euros in 2012. That was after the 200-year-old group, the second-biggest carmaker in Europe, took a series of crisis cost-cutting measures to save 1.5 billion euros.
The group, criticised by a government enquiry for missing opportunities of globalisation for many years, declared that this new chapter would accelerate "its globalisation and emerging markets expansion strategy, while reinforcing its financial strength."
The group had been burning up cash so fast that the French government had become concerned about its capacity to survive, but wanted to ensure it remained under majority French control.
In the latest buy-in of a Chinese giant to a struggling Western firm, Peugeot announced that Chinese state-controlled Dongfeng and the French government would each inject 800 million euros ($1.1 billion) for 14-percent stakes in the company.
The Peugeot family - which has controlled the firm since its founding in 1810 as a maker of coffee mills and bicycles - will see its 25-percent stake and 38-percent voting rights diluted to the same amount as the stakes for the government and Chinese state-controlled Dongfeng.
"We have experienced some very difficult years for the automibile industry in Europe, which amplified the structural difficulties in our Group, too focused on the European continent," said outgoing chief executive Philippe Varin.
"We reacted vigorously with difficult restructuring, of which we are starting to see the fruits internationalisation has followed with notably an excellent performance recorded in China.
The deal will come to Peugeot's rescue after the group, number two in Europe after German giant VW and the biggest automaker in France, was in effect rescued by the French state with guaranees of 7.0 billion euros for its credit arm. Peugeot has been among the hardest hit by a European slump in car sales, and has had to cut thousands of jobs.
For China, where Dongfeng is the second-biggest automaker, the agreement marks the latest high-profile acquisition by the economic powerhouse of a Western company. Last month, Chinese tech giant Lenovo bought Motorola from Google in $2.9 billion deal.
None of the three main shareholders would be allowed to increase its stake for 10 years - seen as an effort to limit Dongfeng's influence at Peugeot, which employs nearly 90,000 people in France.
The final deal is expected to be signed at the end of next month during a visit by Chinese President Xi Jinping to Paris.