Peugeot shares fall on report company seeking cash

Shares in French auto maker PSA Peugeot Citroen fell sharply on Wednesday on an unconfirmed report the cash-poor company was considering raising more capital. In morning trade, shares in the group fell by 3.10 percent to 7.13 euros on a Paris market down by 0.63 percent. According to a report on the latribune.fr website, embattled Peugeot is weighing whether to raise more capital, after burning through a treasury of 2.5 billion euros last year. "We are actively discussing at PSA and obviously within the Peugeot family of an possible capital increase," a company source told the business news website. The company refused to comment on what it called a rumour, but said its dire financial situation, which required the intervention of the French state, had improved over the past 12 months. Analysts said an increase in capital, which could be an extremely expensive exercise for the struggling carmaker, seemed unlikely in the short-term. On Wednesday Peugeot, Europe's second biggest carmaker after Volkswagen, began tense competitivenesses talks with French unions on how to reduce operations to face plummeting demand. Earlier this month industry data showed Peugeot's domestic production of cars and light trucks fell by a whopping 35.7 percent in the January-March period compared with the same period a year ago, and by 18.8 percent outside of France. Peugeot last year sparked a political uproar in France when it announced the closure of an emblematic factory outside Paris as part of a drive to reduce costs.