PSA is the worst casualty of Europe crisis

 According to KHABARKHODRO, PSA/Peugeot-Citroen's sliding share price has left the French carmaker trading at a record discount to Volkswagen AG on investor expectations it will be the worst automotive casualty of the region's sovereign debt crisis.Paris-based PSA has declined 41 percent this year, the steepest decline among European automakers, expanding the gap to Volkswagen's shares to 91 euros from a 10-year average of 16 euros.

Its 3.8 billion-euro ($5.2 billion) market value is less than one-tenth of 2010 annual revenue of 56 billion euros.CEO Philippe Varin's efforts to reduce dependence on Europe through emerging-market expansion may be too late to prevent PSA, Europe's second-largest automaker after VW, from taking the brunt of a downturn, investors said.

he first-half operating margin at Peugeot's automotive division fell to 1.8 percent from 2.5 percent.

"As soon as there's any kind of wind, Peugeot's margins blow away," said Lorenz Blume, an analyst at Stuttgart-based LBBW Asset Management, which offloaded 190,000 Peugeot shares in the first half and now holds 3,600 among its 18 billion euros of investments. "There's no such thing as too cheap if they're going to burn cash again."

The carmaker posted first-half free cash flow that was a negative 179 million euros and in July forecast a figure "close to neutral" for the full year.

During the last downturn, PSA reported 3.76 billion euros in negative cash flow in 2008 and a 343 million-euro net loss, prompting Varin to promise cost cuts and a sales boost to narrow the gap with peers.PSAt's first-half European sales accounted for 62 percent of the total, while VW's made up 50 percent. The slump in the French company's stock means PSA is valued at 2,096 euros per car sold in the first half versus 11,334 euros for every vehicle sold by VW.

PSA shares trade at 3.2 times the company's estimated full-year earnings, according to Bloomberg data. That compares with 3.6 for Renault SA, 4.7 for VW and 6.4 for Fiat SpA.

"When things go bad in Europe, you sell Peugeot," London- based Credit Suisse analyst Erich Hauser said. "Iestors see the stock as a pure regional play."

Varin introduced new vehicles including the 5008 crossover, 508 large car and Citroen DS3 premium subcompact in the last two years to lift sales and pricing power. T

he carmaker's eight-month European market share nonetheless declined to 12.9 percent from 13.7 percent a year earlier, according to ACEA, the Brussels-based European automakers association. VW gained to 23.2 percent from 21.4 percent.