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Peugeot to write off 1.1 bn euros as market slumps, forex bites

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(Globalpost/GlobalPost)

Ailing French car-maker PSA Peugeot Citroen said Thursday it would have to write about 1.1 billion euros off its full year earnings, hurt by worsening markets and unfavourable exchange rates in Russia and Latin America.

"The impairment charges, which may represent around 1.1 billion euros, will reduce consolidated results by the same amount but will not involve any cash-out," said the company.

Peugeot lost 426 million euros in the first half of the year alone as sales in its biggest market Europe collapsed.

It had been looking to other parts of the world, such as China and Argentina, for growth.

But the group said Thursday that current exchange rates were unfavourable.

A one percentage point change in the euro against other currencies, including the Brazilian real, the Argentine peso and the Russian ruble, will have "an impact of around 80 million euros on Automotive Division recurring operating income based on current market conditions".

It also confirmed that it was in talks with China's second-biggest car-maker Dongfeng Motor about a potential capital injection.

It stressed that there has not been any agreement on a transaction and added that the talks were at a preliminary stage.

Dongfeng already has a joint venture with Peugeot in China, and rumours have been swirling for months that the two were in talks about a possible cash injection in the loss-making French group.

Late October, Dongfeng said it was studying the "rationality" of coming to the aid of Peugeot.

In a separate statement, Peugeot said GM was ready to back the entrant of a new shareholder in the French group.

GM, which holds about 7 percent of the French group, would "vote any PSA shares it would hold in favour of any such transaction", it said.

About a quarter of PSA shares are held by the Peugeot family.

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http://www.globalpost.com/dispatch/news/afp/131212/peugeot-write-11-bn-euros-market-slumps-forex-bites