PSA Peugeot Citroen plans to save 1.5 bln eur from cuts image

Europe’s second largest carmaker, PSA Peugeot Citroen plans to save 1.5 billion euros from cuts until 2015.

PSA lost $990 million in the first half of the year, underscoring the difficulties the company faces amid a looming battle with the French government over its restructuring plan.

Peugeot’s core automotive division, the closely watched barometer of the company’s health, posted an operating loss of EUR662 million, below the EUR700 million estimated by the company earlier this month.

The cost cutting plan, dubbed “Rebound 2015″ in the statement, will include 600 million euros in savings from reorganising French production, which includes the previously announced job cuts.

The company also aims to cut 550 million euros from investment and generate a further 350 million through cooperation with alliance partner General Motors.

“The group is facing difficult times,” Peugeot chief Philippe Varin said in the statement.

“The depth and persistence of the crisis impacting our business in Europe requires the launch of the reorganisation of our French production base and a reduction in our structural costs,” he said.

The carmaker, which employs 100,000 people in France, is a key symbol of the country’s industry and its problems highlight France’s difficulty in competing with rivals with lower labour costs.

New registrations for cars in the European Union dropped by 2.8 percent to just over 1.2 million vehicles in June, constituting the ninth consecutive month of declining sales in the 27-nation bloc, the European Automobile Manufacturers Association (ACEA) said.

Among the five biggest markets, Italy’s registrations plunged 24 percent in June, pushing the six-month drop to 20 percent, while Spain’s contracted 12 percent, leading to an 8.2 percent first-half drop.