FRANKFURT, February 13: Currency hedging misadventures and the costs of withdrawing from an Indian joint venture (PAL-Peugeot Ltd) led to French car maker Peugeot-Citroen reporting a massive $418 million net loss for 1997.The auto maker sprang a surprise on investors after trading closed yesterday in Paris by reporting its first net loss since 1993 and revealing that it had lost $236.3 million dollars from currency hedging.
Apart from these reasons, the company also attributed the losses to its higher-than-expected restructuring costs and the decision to shift to the US accounting principles. This resulted in the company's stock falling 1.6 per cent to 848 francs (139.16 dollars) after shocked analysts were left wondering whether the company's statement could be the proverbial tip of the iceberg. Jean-Martin Folz, who took over as chairman of Europe's fourth-largest auto maker late last year, waanted to start with a clean slate, said spokeswoman Olivia Perroux. Folz's predecessor Jacques Calvet wasforced out by the company's shareholders last September after 13 years in the driver's seat.
Calvet is regarded as having left Folz a company in better financial shape than some of its competitors in Europe, but well behind the pack in terms of the kind of industrial restructuring considered necessary to survive.
The extent of largely unexpected charges - especially the hedging losses - distressed analysts though Peugeot said it was making a provision of 1.44 billion francs for unwinding hedging contracts with the British fund prematurely, 600 million francs for early retirement of a diesel engine range and 900 million francs for payroll-cuts.
In addition, charges associated with the change in accounting standards and an exceptional tax expense totalled 5.05 billion francs.
However, analysts welcomed the indication that the company was going to try and reduce the average age of its work force by expanding existing early retirement plans.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
