Peugeot prepares itself for slowdown

PSA Peugeot-Citroën has begun reducing shifts and production of some of its small cars and might need to cut its headcount to prepare itself for an economic slowdown or recession, according to Philippe Varin, its chief executive.

The French carmaker has also set up 50 working groups to root out cost savings “from the cellar to the attic – across the company”, Mr Varin told the Financial Times.


Mr Varin’s remarks are the first by a leading carmaking chief to the effect that the crisis in the eurozone and threat of renewed recession could lead to cuts in production and jobs, as they did after the financial crisis in 2008.

The group is Europe’s second-largest carmaker by sales after Germany’s Volkswagen.

Mr Varin said that Peugeot had not yet seen a slowdown of orders, and was sticking to its current forecasts that the European Union’s car market would remain flat this year.

But he said the carmaker was pre-emptively cutting some shifts and production of some of its models, including the Peugeot 207 and Citroën C3 small cars, in order to meet its target of having 60 days’ worth of inventory at year end.

“It’s a very uncertain outlook today, to tell the truth,” Mr Varin said on the eve of the Frankfurt auto show. “I don’t have a crystal ball, but at the management level of the company we are preparing for tougher times.”

Mr Varin said plans to reduce the carmaker’s headcount was a “work in progress”, and so he could not confirm the number of jobs that might go.

He said: “You don’t reduce your costs if you keep your headcount unchanged.”

He said Peugeot would be able to cut the size of its payroll without sacking workers, because of the large proportion of agency staff in its workforce, as well as “mobility agreements” made with its unions last year that allow workers to be shifted between plants. Peugeot cut its staff by about 10 per cent between 2007 and 2009 – all voluntary departures, but has been hiring again on the back of strong overseas sales. It employed more than 205,000 people as of end-June.

Mr Varin said he was calling for deeper cost cuts in the context of the company’s performance plan unveiled two years ago, aimed at improving the company’s financial performance by €3.7bn ($5bn) over three years. “Today if you look at our order books, in the real world nothing has changed,” Mr Varin said.

“But the message is that we want to be prepared if things in terms of economic outlook are more difficult.”

He said he was increasing the proportion of cost cuts within it relative to other factors such as improvements in pricing or market share.

The French carmaking group is building its presence in overseas markets and building higher-priced cars in a bid to grow outside Europe’s oversupplied volume-car market.

Mr Varin said Citroen planned to build three DS models for China to complement the three it sells in Europe: a midsize “C” segment sport utility vehicle and saloon similar in size to its European DS4, plus an upper-middle “D” segment car longer than the DS5.

Peugeot’s boss said the cost cuts in Europe would help fund its ambition to grow globally and upscale its brands.

“We have to reinforce in our European operations competitiveness to ensure the proper cash flow generation to fund these two ambitions”, he said.