PEUGEOT A CASUALTY OF EU CRISIS, SACKS 8000, CLOSES PARIS PLANET

By Down Jones Newswire on July 13, 2012

PEUGEOT told union leaders last night that it planned to stop production at a major plant north of Paris by 2014 and lay off 8,000 workers, the latest in a potential spate of closures in Europe's troubled automobile industry.


The end of production in Aulnay-sous-Bois will eliminate more than 3,000 jobs, part of a broader plan to cut 8,000 posts in France, the automaker told union leaders in a meeting at its Paris headquarters. That represents 8 per cent of PSA's 100,000-strong French workforce. The cuts will hit Aulnay, as well as its plant in Rennes, which would shed 1400 of its 5600 jobs. A corporate restructuring should lead to another 3,600 job losses across France, the company said. Reuters reported that Aulnay would be the first French car plant to close in two decades, with the announcement undermining new Socialist President Francois Hollande's pledge to revive domestic industrial production. PSA Peugeot Citroen, the carmaker’s parent company, which is led and largely controlled by the Peugeot family, is struggling to cope with steep declines in demand for cars from European consumers, and mounting losses on underused auto plants. Over the first six months of 2012, Peugeot said its auto market fell 10 per cent, as it is "very exposed" to weak demand in southern Europe.


Peugeot had already announced plans to cut €1 billion ($1.20 billion) and slash 6000 jobs for 2012, after a cash outflow of €1.65 billion last year. But as the auto market has worsened in Europe, it hasn't been enough: the company now says it expects an operating loss at its automotive division of more €700 million, more than analysts' estimates.


The company struck a wide-ranging deal with US auto maker General Motors earlier this year to help ease its pain. But the benefits of buying parts together and perhaps even sharing some production will take years to implement or show up on the balance sheet. PSA shares fell 2.4 per cent to hit a record low of €6.96 overnight. French Prime Minister Jean-Marc Ayrault said that an aid plan for the country's automobile sector would be presented to the government on July 25, and that he had requested that industry minister Arnaud Montebourg meet with all those affected by Peugeot's restructuring plan.


The industry minister will send an expert to evaluate Peugeot's restructuring plan and its effects on France and its automobile industry, according to the statement from the Prime Minister. The first elements of the report will be presented before the end of the month, it said.
Mr Montebourg said overnight that Peugeot needed to look again at its cost-cutting plan.
"We do not accept the plan in its current state," Mr Montebourg told the French Senate, adding that the company will need to justify the measures.


Speaking on French television, however, Peugeot’s CEO Philippe Varin said that the current financial situation of the company was unsustainable, an issue about which PSA had been transparent with the government. "I know how serious these measures are for the people concerned, and for our entire company," chief executive Philippe Varin was quoted by Reuters as saying. "But a company can't preserve jobs when it's burning €200 million a month in cash," he said. "Prevaricating would have put the group in great danger."


The European Union would be "happy to consider" requests by the French government for funding to retrain or otherwise support workers who lose their jobs as part of auto maker Peugeot cost-savings program, a spokesman said. Meanwhile, General Motors sacked Opel’s chief executive in a sign that the US carmaker was growing impatient to reverse more than a decade of losses in Europe.


GM said Opel CEO Karl-Friedrich Stracke had stepped down to take on "special assignments" for GM CEO Dan Akerson. GM vice chairman Steve Girsky, who heads Opel's board, will serve as acting Europe chief until a successor is found.