French automaker PSA Peugeot Citroen said this week that they are negotiating to sell their Gefco logistics business to J.S.C. Russian Railways. The company decided to make this move due to its struggles in the European car market.
PSA Peugeot Citroen is the second-largest carmaker in Europe decided to enter negotiations to sell 75 percent of Gefco for approximately 800 million euros, which equals out to $1 billion U.S. dollars. Gefco will also pay 100 million euros to Peugeot if the deal goes through.
For the J.S.C. Russian Railways, also known as RZD, the acquisition secures there position in Europe for now, which is important strategically in spite of the weakness in the economy that has haunted Peugeot. RZD hopes to make an overland freight service between Asia and Europe for cargo that n travels a more indirect voyage by water.
"Russian Railways can offer competitive transportation services after undertaking a significant amount of work recently," RZD said in a statement to The New York Times. "The next logical step is to develop a sales network for transit transcontinental transportation services via an international logistics company."
The French automaker is suffering due to heavy exposure to the European market and its dependence on low-margin models. New car registrations were down 7.1 percent this year in Europe, and with Europe in a recession currently analysts are not predicting a quick turnaround.
Peugeot stated this week that they hope the deal will help Gefco to grow in places like Eastern and Central Europe, India, China, and Latin America.
Earlier in 2012 Gefco had signed an exclusive long-term contract with Peugeot's auto division. Annually the company sold 1.2 million cars around the world. In June they reached a similar deal with General Motor's Europe to sell to plants in places such as Spain, Britain, Russia and Germany.
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