Brussels, 30 July 2013
State aid: the Commission approves the restructuring plan for the PSA Peugeot Citroën group
Following an in-depth investigation (see IP/13/392), the European Commission has concluded that restructuring aid of EUR 571.9 million granted by France to the PSA group is compatible with the internal market. In particular, the updated structuring plan will help to restore the group to viability while limiting the distortions of competition caused by State aid.
‘Following an in-depth investigation, we have arrived at a formula which allows PSA to restructure in accordance with clear limits, reducing to a minimum the damaging effects for competitors who have not received support from public funding. This is a balanced result which offers the PSA group the chance to make a new start on a sound basis’, said Joaquín Almunia, Vice-President of the Commission with responsibility for competition policy.
The aid will take the form of a State guarantee covering bond issues by the Banque PSA Finance until 31 December 2016 up to a maximum of EUR 7 billion for the principal (a gross subsidy-equivalent of EUR 486 million) on the one hand, and a repayable advance of EUR 85.9 million for the implementation of the ‘50CO2Cars’ R&D project on the other. This brings the total amount of restructuring aid to EUR 571.9 million.
The updating of the group’s restructuring plan based on recent trends on the vehicle market in Europe has eased the Commission’s concerns regarding the group’s return to viability. Should the group’s results be considerably below those envisaged by the plan, the group has undertaken to take additional corrective action so as not to exceed a certain level of net debt during the restructuring period. The group’s return to viability will also help the situation of the Bank, whose present difficulties are due to its organic links with the rest of the group. The Commission also felt that the ‘50CO2Cars’ R&D project to develop a ‘mild-hybrid’ diesel engine, which is part of the restructuring plan, will make a positive contribution to the viability of the group.
The State guarantee for bond issues by the Banque PSA Finance will enable it to refinance more cheaply. This advantage must be proportionate to the objective of the group’s return to viability, but 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. The French authorities therefore undertake to increase the price of the guarantee paid by PSA (currently 260 basis points a year on the amounts issued) based on the penetration rate of Banque PSA Finance, that is to say the proportion of Peugeot and Citroën vehicles sold with financing from Banque PSA Finance. If the penetration rate increases substantially, the price may increase to 491 basis points, corresponding to the market price estimated by the Commission.
In addition, the PSA group has promised to maintain the margin for loans granted by Banque PSA Finance to dealers and to refrain from making major acquisitions during the period covered by the restructuring plan. Lastly, the EUR 24.5 million in subsidies initially provided for 50CO2Cars will be converted into recoverable advances so that, if the technology is successful, the advances will be repaid to the State in full.
An independent expert will be appointed, with the prior approval of the Commission, to ensure that these measures are complied with.
Finally, the PSA group will contribute to the costs of its restructuring through the setting up of a major plan for the sale of assets.
The Commission concluded that the restructuring plan, together with the undertakings from the French authorities, will enable the PSA group to return to viability, while at the same time protecting in a balanced way the interests of competitors who have not had public funding.
Rescue and restructuring aid is highly distortive of competition as it artificially keeps companies in the market that, without such aid, would not have been able to remain there. The EU Rescue and Restructuring Guidelines therefore set out a number of criteria to ensure that such aid goes only to companies that have a realistic prospect of viability and that take measures to alleviate the distortions of competition brought about by the state support (see IP/04/856 end MEMO/04/172).
In particular, the guidelines require a sound restructuring plan that enables the beneficiary to become viable in the long-term on the basis of realistic assumptions, so that it does not have to continue to ask for public support rather than competing on its own merits. As public funding gives a company an economic advantage that its competitors do not have, the plan must include measures to reduce the distortions of competition caused by the state support, such as the reduction of capacity or market share. Furthermore, the beneficiary must make a significant own contribution to the costs of restructuring. Finally, restructuring aid may be granted only once over a period of ten years ('one time, last time' principle).
In February 2013, the Commission gave temporary approval for the guarantee granted by France, covering bond issues by the Banque PSA Finance S.A., up to a nominal amount of EUR 1.2 billion (see IP/13/106). In May 2013, the Commission opened an in-depth investigation into the restructuring of the PSA group, mainly because it had doubts about the return to long-term viability of the group and whether the notified compensatory measures were sufficient (see IP/13/392).
The non-confidential version of the decision will be made available under the case number SA.35611 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.