The Peugeot family, the largest shareholder in PSA Peugeot Citroen, approved a recapitalisation deal under which the French state and Chinese partner Dongfeng would both have 14 percent stake in the group, according to local media reports.
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The boards of the Peugeot family holding Etablissements Peugeot Freres and its FFP subsidiary gave the green light late on Monday to raise PSA's capital by 3 billion euros (4.11 billion U.S. dollars).
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The aim is to bolster the loss-making company's financial assets and help the firm preserve its market shares and boost sales, the report said.
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In a two-stage capital operation, the French government and the Chinese company Dongfeng will each inject 750 million euros. The remaining 1.5 billion euros would be garnered via additional public floatations.
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The tie-up with China's second-biggest carmaker was scheduled to be announced on Wednesday, according to the report.
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Paralysed by poor competitiveness and sluggish sales, PSA said it would cut 8,000 jobs and close one factory in France as part of a restructuring plan.
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Last year, France's leading auto manufacturer reported a 4.9-percent-decline in its worldwide sales to 2.82 million units due to persistent falling sales in Europe where it sold 7.3 percent fewer vehicles.