Le Bailout Watch: France To Save Peugeot, Germans Say Verboten

The French government will provide multi-billion euro guarantees to GM's alliance-partner PSA Peugeot-Citroen via PSA's banking arm, Reuters says. Don't bet on it happening: There is already opposition from Germany, and wait until Brussels officially hears of the deal. As explained in the morning, PSA is facing a serious cash dilemma. The French government is ready to provide loan guarantees between $6.5 billion and $9 billion, a reliable source told Reuters. The money will officially go to PSA's bank, but will benefit PSA immediately. The aid would allow the bank to offer cheaper financing to car buyers, and compete with rival Volkswagen at least when it comes to cheap financing offers. Also as explained earlier, the aid comes with strong strings attached: Reduced job cuts, French plants stay open, government and worker representatives get a seat on the board. Also as speculated earlier in the day, it will be hard to impossible to get this package past the EU commissars in Brussels. Already, the German state of Lower Saxony says it will report the deal to Brussels as a possible breach of EU rules, writes Die Welt. Lower Saxony is a shareholder of Volkswagen, which is headquartered in the state. Brussels has not been informed of any agreement. When notified, the EU regulator examines aid packages for compliance with strict EU rules. "The Commission ensures that there are no protectionist conditions placed on the attribution of aid," an EU spokesman told Reuters. In 2009, the EU Commission shot down conditions attached to 6 billion euros of state loans for Peugeot and Renault: "If the help comes with conditions, for instance to keep production in France, then these measures would be illegal and would not be approved by us," free trade commissar Neelie Kroes said at the time. This time, the opposition likely will be stronger, as German carmakers really don't mind seeing their French colleagues gasping for air. from The Truth About Cars http://www.thetruthaboutcars.com

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