French auto manufacturer PSA Peugeot Citroen has signed a contract to sell 75% of its Gefco logistics business to Russian Railways for EUR800mn (US$1.03bn). PSA will utilise the proceeds to help cover its losses in the region and stabilise its debt. CFW believes that mass market auto manufacturers will continue to seek to sell-off non-core divisions and consolidate their business operations across the region as they face declining sales.
CFW remains bearish on PSA's short-term prospects. Substantial declines in sales have hampered the company's profitability and share price. In the first nine months of 2012 PSA's sales in Europe declined 13% year-on-year (y-o-y), to 1,120,538 units. Indeed, we maintain a bearish outlook for passenger car sales across the region, and expect the decline in sales to continue for many mass market auto makers in the region over the medium term.
|PSA Stock Price, EUR, November 2011 To Present|
PSA's fundamental problems are declining sales and rising operational costs. As with other mass manufacturers operating in Europe, we believe PSA may need to address its overcapacity problem and shift its strategic focus (in terms of sales and production facilities) towards higher-growth markets. Indeed, other mass market automotive manufacturers have taken steps to abate their declining sales in the region, and have closed factories and sold-off non-core divisions. We expect this trend to continue.