Peugeot denies any capital tie-up with Mitsubishi Motors

PARIS November 14, 2004; Channnel News Asia reported that Peugeot of France on Saturday denied a report from Tokyo that it was in talks with scandal-hit Japanese automaker Mitsubishi Motors over a comprehensive alliance that includes a capital tie-up.

"We categorically deny being in talks with Mitsubishi over a capital tie-up or an alliance, which is not part of our group's policy," a spokesman for PSA Peugeot Citroen Group said.

Japanese business daily Nihon Keizai Shimbun reported that Mitsubishi, reeling from the fallout of a series of vehicle defect cover-ups, hopes to link with Peugeot in a bid to turn its poor earnings around and Peugeot is likely to invest in the Japanese company.

The daily quoted a source as saying Peugeot would take an "equity stake (in Mitsubishi) not exceeding DaimlerChrysler's ownership ratio." US-German auto group DaimlerChrysler holds a 20 percent stake in Mitsubishi.

Under a deal, Mitsubishi Motors and Peugeot would supply vehicles and engines to each other in the United States and Europe, the daily said.

As sales remain sluggish, Mitsubishi hopes to use the alliance with Peugeot to boost its factory utilization rates and cut engine development costs, the daily said.

In April, DaimlerChrysler decided against injecting fresh capital into Mitsubishi, forcing the Japanese auto maker to look for help from fellow Mitsubishi group firms and other investors to finance its restructuring.

Earlier in the month, Mitsubishi said its interim net loss nearly doubled to 146.16 billion yen (1.38 billion dollars) and announced the company was downgrading its full-year earnings forecast.