Mounting losses force Peugeot to cut 8,000 jobs

Paris: French automaker PSA Peugeot Citroen announced 8,000 job cuts and the closure of an assembly plant as it struggles with mounting losses at the core automotive division.

The Aulnay plant near Paris, which employs more than 3,000 workers, will halt in 2014 as part of a drive to reorganize Peugeot’s under-used domestic production capacity, the company said on Thursday.

A second factory in Rennes, western France, will shed 1,400 of its 5,600 jobs as it downsizes in response to shrinking demand for larger cars such as the Peugeot 508 and Citroen C5. Some 3,600 non-assembly jobs will also be scrapped across the company.

“I am fully aware of the seriousness of today’s announcements,” Chief Executive Philippe Varin said in the company’s statement. “The depth and persistence of the crisis impacting our business in Europe have now made this reorganisation project indispensable.”

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Peugeot said it would post a net loss in the first half and a 700 million-euro ($857.5 million) operating loss for the core car-making division. Operating cash flow is expected to remain negative until late 2014, the company said.

Peugeot said it plans to convert the Aulnay site for other activities and seek new positions within the group for around half its workforce.

The latest measures are in addition to 6,000 job cuts announced last year, which included 2,500 external positions at subcontractors and service providers.

Peugeot’s core auto division swung to a loss last year and has deteriorated since, as the Peugeot and Citroen brands lose ground to competitors in a shrinking European market.

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Unlike Volkswagen, the French automaker is heavily exposed to southern markets worst hit by the region’s debt crisis, and lacks its German rival’s export success as well as the support of a low-cost brand like Renault’s Dacia.

Paris-based Peugeot last week posted a 13 percent decline in first-half sales to 1.62 million light vehicles - contrasting with a more modest 3.3 percent decline reported by Renault and a 10 percent gain for the VW brand.

The stock has plunged 32 percent this year, wiping 1.2 billion euros off the struggling automaker’s market value. General Motors bought a 7 percent Peugeot stake in March as part of a far-reaching alliance plan announced the previous month.

Peugeot executives had already outlined plans to close Aulnay in a document leaked to unions in June 2011 - while warning that an announcement would be impossible before French elections which ended last month.

Peugeot also struck a tentative deal with Italy’s Fiat on Wednesday to end the companies’ Sevelnord delivery-truck venture. Fiat will sell its half of the plant in northern France to Peugeot by the end of 2012 but keep a share of its production for another four years, under their draft agreement.

Workers at Sevelnord, which assembles the Peugeot Expert, Citroen Jumpy and Fiat Scudo commercial vans, were asked in May to agree to a pay freeze, hundreds of job cuts and other concessions or face possible closure.

Peugeot must tread carefully to reassure France’s new Socialist President Francois Hollande that the job cuts are a necessary response to the crisis.

Reacting to its announcement, Social Affairs Minister Marisol Touraine said the job cuts were “unacceptable” from a company that had benefited from billions of euros in state support to the auto sector in recent years.

“We cannot accept something like this,” she told Europe 1 radio. A government expert appointed last month to examine Peugeot’s finances will report back in two weeks, she said.

Reuters