PSA Expected to Sell Auto Supplier Faurecia

PARIS – Rumors PSA Peugeot Citroen plans to sell its majority stake in auto-supplier Faurecia have gained credibility since CM-CIC Securities’ recent announcement that it probably will happen.

Faurecia supplies systems and components in four areas: seating, emission control, interiors and exteriors.

The French stock market is reacting positively, with prices rising for both Faurecia and PSA, up 5% Monday. Investors believe the French auto maker would be better off with the cash the sale could raise.

They also think Faurecia would benefit from no longer being connected to PSA, which is in a weak position burning up €200 million ($260 million) a month or more as its sales in Europe decline.

On Tuesday, as Faurecia gained another 3% on the stock market and PSA shares remained stable, Faurecia CEO Yann Delabriere visited the French ministry of economy.

On the same day, the French minister of industrial renewal, Arnaud Montebourg, tells a roundtable of journalists that he cannot discuss details of PSA’s plans because France now has a representative on the board of directors since guaranteeing the auto maker up to €7 billion ($.9.2 billion) in bank loans.

Montebourg says he supports PSA’s alliance with General Motors and that PSA has additional projects with GM not yet revealed to the public.

Minister of Economy Pierre Moscovici in an interview on Sunday said PSA would have “to go further” to put its finances in order. He also writes in his blog this week, “The group is in a difficult state of transition. It is stable for a few years but must turn toward a partnership. The group has what it takes to become a leading manufacturer again.”

PSA holds 57.4% of Faurecia shares, and in the past several years Faurecia has brought €1.8 billion ($2.4 billion) to PSA. CM-CIC estimates the auto maker could get €1.2 billion to €1.5 billion ($1.6 billion-$1.96 billion) from selling the supplier.

As for buyers, it could be anyone, from competitors such as Magna or Hyundai Mobis to the general stock market and its investors. The French government might be interested in a share of Faurecia, as it has in Renault, in order to maintain some influence in corporate governance, mainly in terms of keeping jobs on France.

Montebourg, in his recent meeting with the Anglo-American Press Assn., says France is establishing a bank aimed at investing in projects that aide “the real economy.”

Faurecia has been growing even as French and European auto production is declining, in part with sales in traditional emerging markets, but also in the U.S., where its investments several years ago have coincided nicely with the country’s past two years of significant growth.

Faurecia embraces its international aspects, and now 41% of its sales are outside Europe. At the Los Angeles auto show last fall, the supplier talked about the influence of five cities on vehicle interior styling: Paris, Berlin, Los Angeles, Shanghai and Seoul.

Faurecia’s business remains strong with the European auto makers, but it is gaining strength in Detroit. For example, Ford is Faurecia’s first customer for a new manifold design on the ’13 Fusion and Fusion Hybrid.

Faurecia ranks as the No.6 automotive supplier globally, with sales of €16.2 billion ($22.5 billion) in 2011. The company will report its full-year 2012 results Feb. 12, but it will release its sales results this week.