Peugeot to cut 6000 jobs as it trims forecasts

PSA Peugeot Citroën said it would shed 6,000 jobs in Europe next year as it became the first carmaker to retrench in the face of the eurozone crisis.

The French group said it was cutting 3,500 full-time and 2,500 temporary jobs, part of €800m of cost cuts the company presented to its European works council on Wednesday in an attempt to restore its core carmaking unit’s competitiveness and profitability.

This came after Peugeot cut its earnings forecast for the year and reported a 1.6 per cent drop in third-quarter revenues from its automotive division to €1.31bn because of pricing pressure on Europe’s stagnant market and sourcing difficulties caused by the disaster in Japan.

Three of the French group’s biggest markets – France, Italy, and Spain – are at the nexus of the debt crisis now weighing on the European economy. Outside France, it has plants in Spain, Slovakia and the Czech Republic.

“We are not obviously in a worst-case scenario today,” Philippe Varin, Peugeot’s chief executive told the Financial Times. However, he added: “After what is happening with the euro, we should not expect growth, so we need to reduce our fixed costs.”

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

The job cuts are hugely sensitive in France, where the carmaker is one of the biggest private-sector employers, and the country is preparing for next year’s presidential elections. The powerful CGT union accused the company of a “veritable blood-letting against workers”.

Mr Varin spoke with Eric Besson, industry minister, and gave assurances that the company would continue to devote 40 per cent of its production and 80 per cent of its industrial investment to France, according to the ministry.

The French state is not a shareholder in Peugeot, but gave the company a €3bn bail-out loan in 2009 which has since been repaid.

Speaking to the Financial Times, Mr Varin would not say how many of the staff jobs would go in France, and how many elsewhere in Europe. The company is due to consult with unions on the cuts at a meeting on November 15.

Of the 3,500 staff jobs facing the axe, 2,500 are in non-production areas such as sales and administration and 1,000 in production. Mr Varin said that many of the positions could be eliminated without layoffs, through natural attrition and retraining of staff to do jobs formerly performed by agency workers.

Peugeot’s boss said the agency jobs to be shed were mainly in France and mostly in the company’s research and development and IT departments.

The group said it expected its full-year operating income to be close to break-even because of a more difficult operating environment, down €300m from its previous earnings guidance.

In September, Mr Varin told the Financial Times that Peugeot was cutting production days and might need to reduce staff to keep inventory under control amid slower sales.

The French group’s plant in Trnava, Slovakia, which makes its Peugeot 207 and Citroen C3 Picasso models, will be halting for seven days later this month and in November in order to reduce the company’s stock levels.