Peugeot to jettison another 1 500 jobs

Mathieu Rosemain Paris

PSA Peugeot Citroën will eliminate an additional 1 500 jobs by 2014, deepening its workforce reduction as car sales in the euro zone plunge to a 17-year low.

The cuts, which come on top of 8 000 announced in July, would be made by not replacing people who left, spokesman Jonathan Goodman said.

Peugeot is also closing a factory on the outskirts of Paris, selling assets and negotiating a strategic alliance with General Motors (GM) to reduce costs.

The ACEA trade group said Europe’s car market was on track to drop to the lowest sales volume since 1995.

With voluntary redundancies, “you are losing those people who can leave and you are left with the underachievers”, said Erich Hauser, an analyst at Credit Suisse in London who estimates that eliminating so many jobs would save E70 million (R787m) a year.

Workers were told on Tuesday that the car maker’s workforce in France would shrink by 17 percent to 55 900 employees in 2014 as a result of the cuts, Christian Lafaye, the leader of the FO union, said.

Peugeot, which has been depleting cash reserves in the past year at a rate of E200m a month, said in October that net debt at the end of this year would total about E3 billion, compared with a prediction in July of E2.5bn.

Moody’s Investors Service cut Peugeot’s long-term debt rating to three levels below investment grade on October 10, squeezing its banking unit, Banque PSA Finance, which is still rated investment grade.

France’s government stepped in on October 24 to bail out Peugeot, guaranteeing as much as E7bn in new bonds in exchange for greater influence over company strategy. The car maker needed the French state backing for the banking unit to keep borrowing costs down and offer customers competitive financing rates.

The shares have dropped 53 percent this year, valuing Peugeot at E1.75bn. Volkswagen, Europe’s largest car maker, has gained 46 percent this year, giving the German company a market capitalisation of E76bn.

Competitors are also cutting back. GM announced this week that it would shutter a factory in Germany as a result of the region’s plunging sales, threatening 3 100 jobs. The shutdown, the first of a car factory in the country since World War II, is part of GM’s efforts to end losses in Europe by 2015.

Ford intends to shut three plants, one in Belgium and two in the UK. It is forecasting European-division losses totalling $3 billion (R26bn) this year and next, and does not expect a profit in the region before the middle of this decade. – Bloomberg