China's Dongfeng Unsure About Investing in Peugeot
File photo of an employee working on the assembly line at the Dongfeng PSA Peugeot Citroen Factory in Wuhan, China (Reuters).

China's Dongfeng Motor Group remains unsure about the benefits of a planned cash infusion in PSA Peugeot Citroen, a top Dongfeng official said, suggesting that it could be a while before the two firms sign a deal.

Dongfeng and the French government could together invest about €3bn (£2.5bn, $4.1bn) for a 20% to 30% stake in the troubled French car maker.

Loss-making Peugeot wants to conclude the deal this year.

However, China's second-biggest vehicle manufacturer will not rush to invest in Peugeot as it is still examining the "rationality" of the planned move, said Dongfeng's general manager Zhu Fushou.

"If we can complement each other's advantages, if we can achieve synergies, we may go ahead to do it. Otherwise, we would not do it," Zhu said over the weekend, on the sidelines of an industry conference in Shanghai.

"As a partner, we are surely concerned about the overall business of PSA. Last year, it made a net loss of €5bn ($6.9bn)," he added.

To illustrate the complexity of the proposed deal, Zhu cited a recent deal in which Sweden's Volvo acquired a 45% stake in Dongfeng's commercial vehicle unit.

"Regarding the strategic alliance between Dongfeng and Volvo, we made preparations for several years before reaching a consensus. We both agreed that we would greatly benefit each other."

Dongfeng operates a joint venture with PSA in China, the world's largest auto market.

Japanese automakers Honda and Nissan also operate joint ventures with Dongfeng in China.

PSA Shuts Paris Assembly

Last week, PSA Peugeot Citroen shut down a 40-year old Citroen factory located at Aulnay-sous-Bois, on the outskirts of Paris.

The move, which affects 3,000 employees, is part of a plan to do away with some 11,000 jobs in France by 2015.

A shrinking European car market and striking unions, upset over planned factory closures, have together dented Peugeot's earnings.

Earlier in the month, Peugeot reported a 3.7% decline in revenue for the July-September third quarter. Revenue dropped to €12.1bn ($16.8bn).

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