Carmaker Peugeot pushed off France's CAC-40 index

AP News
Posted: Sep 07, 2012 11:31 AM
Carmaker Peugeot pushed off France's CAC-40 index

PARIS (AP) — The Paris bourse will drop PSA Peugeot Citroen from its CAC-40 index of leading French companies after a dismal year for the carmaker, the exchange operator said.

It's a major blow for the company, which has been a part of the index since it was created in 1987, and is an iconic brand in France. Peugeot is considered one of the country's "national champions" — the global companies based in France that help make the country an economic force — but it has faltered in recent years under the weight of plummeting demand in Europe and increasing competition from Asia.

In the past year, as its troubles have piled up, Peugeot's stock has fallen more than 60 percent. Market value is an important factor in building the CAC index; the committee that decides its composition also looks at the volume of stock traded on the exchange.

The index is supposed to include the 40 companies listed on the NYSE Euronext bourse in Paris that are most representative of the entire exchange. Its composition is evaluated at least four times a year, and major names have been dropped before. Air France-KLM, for instance, was removed in 2009.

NYSE Euronext said Thursday night that Solvay, a Belgium-based chemical company, will replace Peugeot. The change takes effect Sept. 24.

Peugeot said it would not comment. Solvay called the news an "important milestone" and said it reflected the company's economic power and growth potential.

Gareth Parker of Russell Indexes said that leaving an index has two effects on a stock. The first is reputational, since an index like the CAC-40 is considered a sort of premium listing.

'Believe Women' Is Perilous Baloney
Michelle Malkin

The other is that some funds, like pension funds, that track the index will automatically drop the stock, said Parker, who is the senior director of index research and design. Other investors may also pull out of Peugeot.

The loss-making company is been under intense pressure in France as it struggles to turn around its business. Its plan to cut 8,000 jobs and close a major factory drew stiff criticism from President Francois Hollande's new Socialist administration and is under negotiation. Unions have also called for protests.