PARIS: Shares in ailing French auto group PSA Peugeot Citroen fell sharply on Friday amid reports, and a denial, that the US group General Motors could take control and inject cash.
PSA shares closed the day with a drop of 2.7 percent to 6.33 euros, in an overall French market down 0.62 percent as measured by the CAC 40 index.
On Thursday the shares had jumped 5.47 percent in an initial response to a report that GM could take control.
The cause of the volatility was reports Peugeot family might be prepared to cede control to GM in return for fresh capital. PSA is struggling to restructure with job cuts and the closure of a big plant.
GM, which owns the German brand Opel, already owns 7.0 percent of the group under a strategic partnership agreed last year, and Dow Jones Newswire reported that according to sources close to the matter, PSA had approached GM with an invitation to inject new capital.
But a spokesman for GM told AFP: "Our position remains unchanged: we have no intention of investing additional funds into PSA at this time. We will not comment on speculation."
The head of GM, Dan Akerson, had expressed the same position last week.
The Peugeot family, and also the French government which has a representative on the supervisory board of the company, declined to comment.
The family controls about 25 percent of the capital and 38 percent of the voting rights.
Sources close to the group said that the board was expected to stand by its forecasts when it published six-month results on July 31.
It would also repeat its wish to halve the rate at which it uses up cash which last year was running at 200 million euros ($261 million) a month.
But one analyst who declined to be named, commented: "The company would well need a new increase of its capital."
Role of Peugeot family:
He said: "This could have the effect of diluting the shareholding of the Peugeot family because they are not prepared to provide more money."
A source close to the matter said that "there is no urgency about this" and that "while the Peugeot family wants to retain their control of Peugeot, their means are not limitless."
At Deutsche Bank, analyst Gaetan Toulemonde commented in a note to clients that if the family were prepared to give up control, that should be seen as "a message to GM to force it to take a more radical decision concerning the future of PSA and GM's subsidiary, Opel."
PSA Peugeot Citroen has been hard hit by a big decline of the European car market.
Last year it reported a record loss of 5.0 billion euros, and its finance arm had to be rescued with government support.
The restructuring, announced last year, was highly controversial in France where there has been widespread public and political hostility in particular to French car companies investing in manufacturing abroad.
However, an expert appointed by the then new socialist government found that PSA was in dire straights, mainly owing to a strategic mistake over many years of missing opportunities offered by globalisation.
Dow Jones also reported that the group had held talks with its Chinese partner Dongfeng on the Chinese taking a stake in the French firm, or on strengthening their industrial alliance. Dongfeng told AFP that it was not aware of this.
On Thursday, the other big French carmaker, Renault said that with its Japanese subsidiary Nissan it had achieved record joint cost savings of 2.69 billion euros ($3.5 billion) in 2012 and counted on continuing to make savings.
This amounted to an increase of 54.0 percent from savings in 2011.
Savings in Asia and Russia had been particularly important because for these markets the two firms were making vehicles in the same factories.
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