EU clears Peugeot restructuring plan, French state aid

The European Commission said Tuesday it has cleared a 7.5 billion euro restructuring plan by struggling French auto giant Peugeot Citroen, including the state aid to back it. The Commission said French government aid to guarantee a bond issue of up to 7.0 billion euros by the company's stricken finance arm conformed with EU competition rules. The bond guarantee is worth 486 million euros while another 85.9 million euros will go to fund more eco-friendly cars, adding up to nearly 572 million euros ($760 million). Peugeot will now be able to "restructure in accordance with clear limits, reducing to a minimum the damaging effects for competitors who have not received support from public funding," EU Competition Commissioner Joaquin Almunia said in a statement. "This is a balanced result which offers the ... group the chance to make a new start on a sound basis," Almunia said. Last year, the company reported a record loss of 5.0 billion euros after its finance arm -- Banque PSA Finance -- had to be rescued with government support. Earlier this month Peugeot, officially known as the PSA Group, said its first-half global sales plunged almost 10 percent, mainly due to a weak European market. Peugeot, which expects a second-half pickup, is due to release its latest quarterly earnings statement on Wednesday. The Commission, the EU's executive arm, said Peugeot's updated restructuring plan had "eased ... concerns regarding the group's return to viability." Should results fall short, however, the company had agreed additional action to ensure that debt does not exceed targets, it added. It said that the bond guarantee would enable Peugeot to raise finance more cheaply and so help its recovery. At the same time, it "must not allow it to offer credit for the purchase of vehicles, which would increase the PSA group's sales artificially and harm its competitors," it said. The struggling car maker welcomed the news, adding also that PSA and its units need prior approval by the commission to make any acquisitions over 100 million euros a year. Peugeot, the biggest French carmaker and Europe's second-biggest after Volkswagen, shocked France in the middle of last year when it announced plans to cut 11,000 jobs between 2012 and 2014 and to shut two French plants.