PARIS - PSA Peugeot Citroën said Thursday that it was negotiating to sell its Gefco logistics business to J.S.C. Russian Railways as the French automaker struggles to stay afloat in a faltering European car market.
PSA Peugeot Citroën, the second-largest automaker in Europe after Volkswagen, said it had entered exclusive negotiations to sell 75 percent of Gefco for 800 million euros, or about $1 billion. Gefco would also pay Peugeot a special dividend of 100 million euros.
The carmaker, in part, is under pressure in its home market. European new passenger car registrations is down by 7.1 percent this year, and - with the euro zone in recession and uncertainty about the existence of the currency itself - analysts are not predicting a near-term turnaround.
Fitch Ratings cut its rating on PSA Peugeot Citroën on Wednesday, saying that it expected the company to burn cash through 2014 and that it was concerned about the carmaker's ability to compete in the market for small and medium-size cars. The credit rating agency noted that it was unlikely that “the ongoing fierce competition and substantial price pressure†will abate in the near term.
PSA Peugeot Citroën said the deal, which is contingent on regulatory approval, would help Gefco to grow in China, India Latin America, as well as in Eastern and Central Europe, particularly Russia.
Earlier this year, Gefco signed an exclusive long-term logistics contract with PSA Peugeot Citroën's automotive division. In late June, it reached a similar deal with General Motors Europe, under which it is to supply G.M.'s factories in Poland, Spain, Britain, Germany and Russia and annually ship 1.2 million finished vehicles across the world.
Gefco, a global industrial logistics company, had 2011 sales of 3.8 billion euros. It ships 28 million tons of freight and 4 million cars annually, with PSA Peugeot Citroën contributing 62 percent of its revenue. JSC Russian Railw ays, known as RZD, is the owner of Russia's rail track and infrastructure.
