No 3, Dongfeng buys in 14% stake in PSA Peugeot Citroen

Philippe Varin (2ndR), outgoing Chief Executive Officer of French carmaker PSA Peugeot Citroen, shakes hands with Xu Ping (2ndL), Chairman of Dongfeng Motor Group Company, as French Finance Minister Pierre Moscovici (R) and Robert Peugeot (L) director of the board of French carmaker PSA Peugeot Citroen attend a signing ceremony at the Elysee Palace in Paris March 26, 2014. French President Francois Hollande (R Rear) and China's President Xi Junping (L Rear) attend the ceremony. [Photo / Agencies]

PSA Peugeot Citroen's tie-up with China's Dongfeng was signed on March 26, bringing the French carmaker much-needed cash and greater access to Asia but leaving major challenges ahead.

French President Francois Hollande and visiting Chinese counterpart Xi Jinping oversaw the signing of a framework deal for State-owned Dongfeng Motor Group and the French government to take matching 14 percent Peugeot stakes in a 3 billion euro ($4.1 billion) capital increase.

Dongfeng's capital injection to give Peugeot new drive

New Peugeot CEO Carlos Tavares must now turn around unprofitable European operations, halt persistent Latin American losses, deliver on China plans that many consider ambitious and treat a Russian headache that may be about to worsen.

The tie-up allows Peugeot and Dongfeng to extend their existing Chinese joint venture to co-develop vehicles, ramp up production to grab a bigger share of the world's largest auto market and export their cars around Asia.

After Wednesday' signing ceremony President Hollande said that deal makes Peugeot "a carmaker of global dimensions that can be present on all markets".

"This is no longer just about selling, it's about investing together," he said.

Tavares, former second in command at rival French carmaker Renault, takes over as CEO next week, with Thierry Peugeot bowing out as chairman in a deal that had pitched him into public conflict with cousin Robert over the dilution of the family's stake and loss of control.

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