Thursday, 20 November 2008

Peugeot to cut up to 3,550 jobs as sales dwindle

PARIS (Reuters) - PSA Peugeot-Citroen, Europe's second-biggest carmaker, announced a fresh wave of job cuts on Thursday as a decline in European car sales is seen continuing into 2009.

The company, which only trails Volkswagen in terms of European sales, said it would cut 2,700 jobs across its sites in France, where it had a workforce of 114,000 in 2007.

It also planned a separate voluntary redundancy plan at its Rennes plant for 850 executives and professional workers affected by the dip in volumes at the site, which makes mid-range and high-end vehicles, a market segment in decline.

"The problem is linked to the current climate but is structural too" at Rennes, where it makes the Citroen C5 and C6 models, a Peugeot spokesman said.

About 900 workers from the site will also be redeployed to other Peugeot factories, the group said.

It forecast sales volumes for the market as a whole would drop 17 percent in the final quarter of this year in main European markets and by at least 10 percent in 2009.

Peugeot made the announcement as the European Union is considering support for its ailing carmakers as part of a broad package of measures to stimulate the 27-nation bloc's economy and address the worst financial crisis in 70 years.

Human Resources Director Jean-Luc Vergne said Peugeot had to act or else it would put the future of the carmaker and its 200,000 jobs worldwide in danger.

The company slashed its 2008 profitability outlook in October and announced "massive" production cuts to combat the sales crisis that is hitting auto makers, after posting a 5.2 percent drop in third-quarter turnover.

"They had to do something," said analyst Ulrich Horstmann at Bayerische Landesbank. Whether the latest wave of job cuts will be enough will depend on what happens to demand, he said.


Car sales have fallen steeply as the effects of the global financial crisis have rippled out into the wider economy. Carmakers are slashing costs and extending the usual Christmas plant idling by a few more weeks to save cash.

"The catastrophe is that demand is going down more than ever," Horstmann said.

He said Peugeot's advantage over some of its rivals was that it had a range of small, fuel-efficient cars.

Peugeot will present the plan for 2,700 departures to its works council on Dec. 2. It has not yet set a date for presenting the separate Rennes cuts.

Since 2007, Peugeot has already scrapped 7,400 jobs through voluntary redundancy.

At 1402 GMT, Peugeot shares were down 4.73 percent at 12.69 euros, underperforming the DJ Stoxx European auto sector index, which was 2.69 percent down.

In western Europe new car registrations in October plunged 15.5 percent, dragged down by poor results at Peugeot, General Motors, Renault and Toyota Motor Corp.

Pressure on European leaders to help the region's carmakers intensified after U.S. Senate Democrats on Monday proposed a $25 billion loan programme for U.S. carmakers.

On Wednesday, Toyota said it would cut its North America output, and Nissan repeated its pessimism over the industry's near-term prospects. France's Renault last week said it would temporarily halt production at some sites in the coming weeks.

Ford Motor Co., GM and Nissan Europe announced in October that they would cut output at European sites.

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