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Peugeot reverses out of French index

Monday, September 24, 2012 - 02:05

Sept.24 - Ailing automotive group PSA, maker of Peugeot and Citroen cars, has dropped out of the French CAC 40 index raising new concerns about the company's future. Sonia Legg reports

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Peugeot was a founding member of France's CAC 40 stock market index . But on Monday - after 25 years - it was replaced by Belgian chemicals group Solvay. PSA Peugeot Citreon, as it is now known, has been hit by a Europe-wide sales slump. It's not alone but its arch rival Renault has weathered the financial storm better and many want to know why. Since January Renault's shares have risen 41 percent while Peugeot's have dropped 43 percent. Christophe Wakim is from Exane BNP Paribas. (SOUNDBITE) (French) QUANTITATIVE ANALYST AT EXANE BNP PARIBAS CHRISTOPHE WAKIM SAYING: "There are concerns about Peugeot's future so this is why probably those investors sold Peugeot shares." In July Peugeot posted a first half net loss of 819 million euros and said it was consuming 200 million euros a month in cash. Job cuts inevitably followed - 8,000 French posts on top of 3,500 already in the pipeline. A French plant will close and another will be scaled down. They'll also be cuts to capital expenditure and research and development. But restructuring takes time and the cash burn won't stop until 2015. This new blow won't help. (SOUNDBITE) (French) QUANTITATIVE ANALYST AT EXANE BNP PARIBAS CHRISTOPHE WAKIM SAYING: "When a stock belongs to an index like the CAC-40, it automatically attracts funds, passive funds that are the index trackers who have to buy stocks from companies in the index to replicate its performance. Also, belonging to the CAC 40 is kind of symbolic." Peugeot's fate has also become a political hot potato Fighting unemployment was one of Francoise Hollande's election pledges. Last week unions at the condemned plant outside Paris called on the President to honour his promise and save their jobs. That may now prove even harder to justify. Sonia Legg, Reuters