Peugeot reveals €4.7bn writedown

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Embattled French car company PSA Peugeot Citroen (Other OTC: PEUGY - news) has announced a huge writedown of €4.7bn (£4bn) for 2012, due to an extremely difficult European market, but said debt and cash targets for the year had been met.

The large majority of the charge pertained to the group's auto business, the company said in a statement, but "neither solvability nor liquidity" were affected.

The announcement comes one week before the company is to announce annual earnings and signals it is likely to post a huge loss for 2012.

Global sales by PSA, France's largest auto company and Europe's second biggest, dropped 16pc last year to below 3m units, as the firm fell victim to slumping demand in Europe, where the company makes about 60pc of its turnover.

A senior executive said the company had come to realise in the second half of last year that the crisis affecting the European market "would be longer than thought".

PSA said it was maintaining its "short and medium-term" financial targets with a net debt of €3bn for the end of 2012 and a return to a balanced cash flow by the end of 2014.

PSA Peugeot Citroen, which announced a production tie-up with General Motors (NYSE: GM - news) in the US, was rescued last year with state guarantees of about €7bn for the group's banking and credit arm.

A plan announced last summer by PSA to close a plant near Paris and axe about 8,000 jobs provoked national controversy and hostility from the newly installed Socialist government.

As its share price has plummeted, PSA was removed from France's CAC 40 (Paris: ^FCHI - news) index of leading stock last year.