Peugeot CEO: “Other automakers may cut European capacity” image

PSA Peugeot Citroen, the French automaker plans to close a factory near Paris and eliminate a total of 14,000 jobs.

CEO Philippe Varin said he “would not be surprised” to see other automakers cut European capacity in the wake of his decision to close a plant near Paris, Le Monde reported on Tuesday.

“The problem of overcapacity doesn’t just concern us,” he was quoted as saying. “I wouldn’t be surprised to see others taking this type of decision.”

The company, which warns it faces a first-half loss of €700 million ($858.2 million) this year, is trying to save €1 billion as it struggles to compete in Europe’s stagnant car market. It is suffering particularly amid a slump in sales in the recession-hit south of Europe, and saw sales plunge 20 percent in Europe in the first quarter.

PSA sparked angry reactions from the French government and unions last week after announcing plans to close the factory near Paris in 2014 and cut 8,000 jobs across the country.

According to documents presented to staff representatives after the announcement, the plant closure and cutbacks would reduce Peugeot’s manufacturing costs by 200-250 euros per car, the French daily reported on Tuesday.

French President Francois Hollande says PSA Peugeot Citroen’s plan to close a factory and slash 14,000 jobs won’t be tolerated.

But suggests otherwise.
In the last major clash between a sitting French president and a company over corporate downsizing, Hollande’s predecessor Nicolas Sarkozy vowed in 2008 that an ArcelorMittal plant in northeastern France would never close and jobs would be saved. A year later, the world’s biggest steel company shut the factory.

Peugeot is selling assets, including a stake in its profitable Gefco trucking unit to raise cash. The Paris-based automaker earlier this year also issued 1 billion euros in new stock to existing shareholders.