The Wall Street Journal (Paris) - PSA Peugeot-Citroën on Friday said its sales slumped due to shrinking demand in its main markets and denied it had asked for state aid as BMW AG's sales reached a record high, showing how the fortunes of European mass-market and luxury car makers have diverged.
In the first half of the year, PSA's sales plunged as demand fell in its main markets of France, Spain and Italy, where the euro-zone crisis has taken a heavy toll on business activity and consumer demand. BMW, by contrast, posted record sales in the period driven by soaring demand in Asia for its luxury cars.
The German car maker delivered 900,539 of its BMW, Mini and Rolls-Royce vehicles to customers in the first half, up 8.1% year-on-year. Sales in Asia jumped 26%, while sales in Europe were flat. BMW, the world's best-selling premium car maker, said it expects sales momentum to improve further as it rolls out fresh models.
"BMW achieved record sales in June and for the first six months of the year and we have an overall record for 2012 well in our sight," sales chief Ian Robertson said.
PSA, France's largest automaker, denied a report that it is asking for a government loan to help ease its financial woes after its sales plunged.
Sales of assembled vehicles and complete knock-down kits—those that contains all the parts needs to assemble a car—fell 13% on the year in the half to 1.619 million. In its key European market, its share shrank to 12.9% from 13.9% a year earlier.
As the bad news sent PSA's shares down 6.4%, the biggest loss on the Paris CAC40 index, the company denied a report on the web site of French financial weekly La Tribune that said Chief Executive Philippe Varin had asked the government for a loan. The report quoted a Socialist politician saying that the government "is ready to come to its assistance, and is even contemplating the state taking a stake in its capital."
"Neither PSA nor...Mr. Varin have asked for a loan," spokesman Pierre-Olivier Salmon said. Later, French Finance Minister Pierre Moscovici also denied the report.
BMW shares were lower after Morgan Stanley earlier Friday cut its rating and target price on concerns about pressure on margins, although it said BMW remains one of the best managed companies in the sector with an exceptionally strong brand, product and technology line-up.
At the height of the financial crisis in late 2008 which sent car sales into a tailspin, PSA and its local rival Renault SA obtained state loans of €3 billion ($3.7 billion) each to ease their liquidity squeeze, and the car makers had to pledge they wouldn't shut down any of their French plants. The loans carried above-market annual interest rates of 6%, so both companies paid off their loans ahead of time.
The poor sales figures show that PSA is suffering again.
The company said it "remains adversely impacted by an unfavorable market mix" with the most promising auto markets for the Peugeot and Citroën brands—France, Spain and Italy—all suffering from a deep slump.
The family-owned auto maker is in talks with labor unions about an intensified cost-cutting program, which might include the closure of one its factories, as it faces increasing pressure to address the lack of competitiveness of its French plants, some of which are operating at below 50% capacity.
French Industry Minister Arnaud Montebourg is working on a plan to help France's auto makers that are handicapped by substantial overcapacity, but PSA insiders fear that any new government aid will come with obligations to protect jobs, holding back the company's ability to adjust its production to demand.
In 2008, the government introduced a car scrapping scheme to boost sales, but the government of President François Hollande is struggling to meet its obligations to shrink its budget deficit and reduce state debt, and has ruled out fresh scrapping incentives.
