PARIS (Reuters) - PSA Group (PA:PEUP) said on Wednesday it had reached agreement with the French government over the carmaker's contribution to a rescue plan for struggling supplier GM&S, defusing their public stand-off ahead of a key bankruptcy hearing.
The government also confirmed it had dropped its demands that the maker of Peugeot , Citroen and DS cars contribute a 5 million euro ($5.8 million) "modernisation" grant to the metal parts supplier on top of a 50 million euro purchasing pledge.
The threat to GM&S and its 277 jobs is in the political spotlight as a first industrial policy test for new President Emmanuel Macron's government.
A court hearing that had been due on Wednesday to rule on the takeover bid by larger supplier GMD, with backing from PSA, Renault (PA:RENA) and the government, was postponed to July 24. GMD plans to restructure the site and keep "at least 120" jobs.
PSA had resisted the grant demand and on Tuesday circulated a letter in which GMD boss Alain Martineau assured the carmaker's Chief Executive Carlos Tavares that his existing offer was enough to safeguard GM&S operations.
The stand-off was resolved after PSA agreed to extend its purchasing commitment to five years averaging 10 million euros annually from three years at 12 million euros, a spokesman for the carmaker said on Wednesday.
The figures clarified earlier comments in which the carmaker had referred to a higher purchasing commitment totaling 60 million euros.
Government officials played down the retreat. "They have come up with more cash," said a finance ministry source. "It's not important to us whether it's financed by orders or not."
A spokesman for Renault, which had separately agreed to inject a 5 million euro grant in addition to its own purchasing commitment, said the company had no immediate comment.
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