PSA Group's relationship with Dongfeng looks set to change as the Chinese automaker examines options for its 12.2 percent stake in the French company, that could include a sale or bond issuance backed by the stock, people familiar with the matter told Bloomberg.
On purely financial terms, such a move makes a great deal of sense. Dongfeng bought the shares as part of a 2014 bailout of PSA, brokered by the French government. That investment has done rather well: PSA has seen the third-best share performance in Bloomberg's Global Automobile Valuation peer group over the past five years, after Geely Automobile Holdings and Fiat Chrysler Automobiles. The 800 million euros ($897 million) Dongfeng spent at the time is now worth around 2.2 billion euros.
On top of that, the operational ventures that underpinned the shareholding have seen better days. Listed subsidiary Dongfeng Motor Group's sales of Peugeot- and Citroen-branded cars fell by about half in the first six months from a year earlier and are running at less than a quarter of their level in 2015. In the key crossover SUV market, models like Citroen's C5 Aircross and Peugeot's 4008 have simply failed to catch fire against competition from Asian and domestic rivals.