Peugeot confirms partnership talks following Dongfeng report

PARIS Wed Oct 9, 2013 9:17am EDT

Employees work in the assembly line of the Peugeot 208 at the PSA-Peugeot Citroen plant in Poissy, near Paris, May 15, 2013. REUTERS/Gonzalo Fuentes

Employees work in the assembly line of the Peugeot 208 at the PSA-Peugeot Citroen plant in Poissy, near Paris, May 15, 2013.

Credit: Reuters/Gonzalo Fuentes

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PARIS (Reuters) - PSA Peugeot Citroen (PEUP.PA) said it is in talks on potential new overseas partnerships, after a Chinese newspaper reported that Dongfeng Motor Co (0489.HK) may buy a 30 percent stake.

Discussions underway also cover new funding for the troubled French car maker's development, a spokesman said.

"Peugeot confirms it is studying new industrial and commercial projects with different partners as well as the financing to accompany them," he said.

According to the China Business News report, Dongfeng is considering a 10 billion yuan ($1.63 billion) investment to buy 30 percent of Peugeot, its partner in an existing joint venture.

Peugeot declined further comment on the report, which quoted an anonymous company source.

Dongfeng officials could not be reached for comment.

Under their Chinese DPCA venture, Peugeot and Dongfeng jointly manufacture vehicles including the Citroen C5 mid-sized car and Peugeot 3008 minivan.

Peugeot is cutting jobs and capacity after losing 5 billion euros ($6.8 billion) last year. Chief Executive Philippe Varin said in July the company was on track to beat its 2013 goal of halving industrial cash burn to 1.5 billion.

The Peugeot family had previously indicated readiness to give up control as the company carried out initial soundings on a Dongfeng tie-up while attempting to revive talks on a deeper alliance with a reluctant General Motors (GM.N).

The two car makers unveiled plans for a broad-based alliance in February 2012, cemented by GM's purchase of a 7 percent Peugeot stake, but cooperation has so far extended to fewer vehicle models and global markets that initially expected.

The compatibility of a Dongfeng tie-up with the Peugeot-GM alliance might depend in part on the Chinese car maker's influence within the partnership, GM Vice-Chairman Steve Girsky told Reuters last month.

Peugeot shares were up 0.9 percent at 12.43 euros as of 1227 GMT on Wednesday, leading a 0.7 percent gain by the broader STOXX Europe 600 autos & parts index .SXAP. ($1 = 0.7355 euros) ($1 = 6.1211 Chinese yuan)

(Reporting by Laurence Frost and Gilles Guillaume, editing by Patrick Lannin)

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