International Corporate Finance: Value Creation with Currency Derivatives in Global Capital Markets, + Website

CASE STUDY 18.1

PSA Peugeot Citroën SA's Economic Exposure to the South Korean Won

This case study accompanies Chapter 18 of International Corporate Finance.

The severe economic downturn engulfing the euro-zone was taking a severe toll on the French automobile industry, which experienced an overall fall of 14 percent in personal car sales during the first six months of 2012. More specifically, Peugeot's and Renault's sales dropped by 20 percent and 17 percent, respectively, in the European Union, where they record most of their sales, whereas the South Korean Hyundai group's sales in France increased by 30 percent over that same period. The slump pushed Peugeot into the red, forcing it to implement far-ranging cost-cutting measures, including the closure of its assembly operations in Aulnay-Sous-Bois and the layoff of 3,000 employees—the first automobile plant closure in France in 20 years. To add insult to injury, Hyundai recently announced that it was hiring 1,000 workers to ramp up its production at its assembly plant in Nosovice (Czech Republic) in order to reach full capacity. Hyundai's successful expansion in Europe seems to rest on its offering competitively priced vehicles—especially the i30 hatchback, its most popular model, which ranks among the 10 best-selling models in its midsize segment. Rival automakers in Europe, however, have attributed Hyundai's success to the South Korean won's weakness against the euro and a free-trade agreement that South Korea signed with ...