Staff Writer
Columbus CEO

c.2013 New York Times News Service

GENEVA — PSA Peugeot Citroën, the ailing French automaker, moved closer to grabbing a financial lifeline Thursday, saying that it was in negotiations with Dongfeng Motor, a state-owned Chinese company with which it already has a joint venture, that could lead to “a potential capital increase.”

At the same time, General Motors said it had sold its 7 percent stake in Peugeot to unidentified institutional investors for undisclosed sums, a move that could open the door for Dongfeng to acquire a piece of the French company. With recent rumors that Peugeot and Dongfeng might be talking, GM’s stake had been considered a complication.

Peugeot, the second-largest European automaker, after Volkswagen, would say only that it was “reviewing potential industrial and commercial development projects with various partners, including Dongfeng.” The company alluded to the capital increase as one of the possibilities.

News reports from Reuters and other outlets have said that Peugeot, which is burning cash during continued weakness in its main European markets, is near an agreement to sell 20 percent stakes on sharply discounted terms to both Dongfeng and the French government.

Antonia Krpina, a spokeswoman for Peugeot, dismissed the reports as “rumors.”

Peugeot also said that it would write down 1.1 billion euros, or $1.5 billion, in assets. The company attributed the decision to “worsening automobile markets and unfavorable exchange rates in Russia and Latin America.”

The combination of announcements hit the stock hard. Peugeot’s shares fell almost 8 percent in Paris, trading to 10.63 euros.

Arnaud Montebourg, the French industry minister, was quoted Thursday by the newsmagazine Le Point as saying that Peugeot was “building global alliances for the long term that will allow it to bounce back and acquire the critical size to be a global manufacturer of the first rank.”

But Montebourg insisted that Peugeot “will remain French.”

GM took pains Thursday to say that, despite selling its Peugeot stake, the companies would continue to work together. “The alliance remains strong, with our focus on joint vehicle programs, cross manufacturing, purchasing and logistics,” Stephen J. Girsky, GM’s vice chairman, said in a statement.

Krpina said the stake sale would not affect the planned joint production of a small minivan at GM’s plant in Zaragoza, Spain. “That’s still on track,” she said. The companies also said Thursday that they would jointly build crossover utility vehicles at Peugeot’s plant in Sochaux, France.