Peugeot Citroen to shed 8,000 jobs in France

FRENCH CAR maker PSA Peugeot Citroen has announced 8,000 job cuts and the closure of an assembly plant as it struggles with mounting losses, in a move that could hasten a wave of restructuring in western Europe.

The Aulnay plant near Paris, which employs more than 3,000 workers, will stop making cars in 2014 as part of a drive to reorganise Peugeot’s under-used domestic production capacity, the company said yesterday. It will be the first car plant to cease production in France for 20 years, posing a challenge to new Socialist president François Hollande’s objective of reviving industrial production.

The government said it was studying the closure plan but stopped short of condemning it, incurring the wrath of France’s biggest industrial union, the hardline CGT.

Prime minister Jean-Marc Ayrault promised in a statement to ensure that Peugeot helped laid- off Aulnay workers to find new jobs and said ministers would present a wider car industry support plan on July 25th.

A second factory in the western city of Rennes will shed 1,400 of its 5,600 jobs as the company 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. “The depth and persistence of the crisis impacting our business in Europe have now made this reorganisation project indispensable.”

Peugeot said it would post a net loss in the first half and a €700 million operating loss for the core car-making division. The manufacturing operations were burning €200 million a month, with cash flow not expected to turn positive until 2015, the company said.

“People were not expecting them to consume cash at such an alarming rate for such a long time,” said Erich Hauser, a London-based auto analyst with Credit Suisse. “This is a company that has run out of options. Peugeot has lost the plot in European small cars, which were its traditional mainstay.”

Shares in Peugeot have plunged 32 per cent since January 1st, wiping €1.2 billion off the struggling car maker’s market value.