Peugeot Settles With CGT Union on French Plant Shutdown

PSA Peugeot Citroen (UG), Europe’s second-largest automaker, reached a deal with a striking union on closing a car factory in France, removing one of the last obstacles to a plan to cut 11,200 domestic jobs.

Peugeot rose to the highest price in 10 months after the CGT agreed to end a walkout by its 130 members at the plant on the outskirts of Paris. The strike had cut the site’s production by about 80 percent this year. The labor group will drop legal action aimed at thwarting a reorganization plan that includes the shutdown, Peugeot said today in a statement.

The carmaker, struggling to restore earnings as the European auto market reaches a two-decade low, has aims to eliminate 17 percent of its French workforce by the end of 2014 as part of a cost-cut program that has also included selling some assets. The Aulnay plant is scheduled to close next year, when the Citroen C3 subcompact model that it builds is replaced.

The agreement “shows that they’re making good progress in the negotiations with the unions,” Sascha Gommel, an analyst at Commerzbank AG in Frankfurt, said today by phone. “If the CGT has finally agreed on the terms of the plan, it will facilitate the implementation of the restructuring.”

Stock Rises

Peugeot jumped as much as 11 percent and was trading up 10 percent at 7.16 euros as of 4:16 p.m. in Paris, reaching the highest level based on closing prices since July 11. The stock has gained 31 percent this year, valuing the carmaker, based in the French capital, at 2.54 billion euros ($3.26 billion).

Manufacturing at Aulnay, where 2,500 people work, has been hampered since January because of the CGT’s walkout. The plant was making as few as 40 to 50 vehicles a day last month, compared with its 250-car capacity. Chief Financial Officer Jean-Baptiste de Chatillon said at the time that the plant was at risk of shutting as early as 2013 because of the disruptions.

The CGT said last month that it planned to appeal the ruling by Judge Anne Lacquemant that threw out a lawsuit by the group and the SUD, another union, saying their challenges to Peugeot’s policy failed to “formulate any precise criticism of the planned measures.”

The SUD suspended its walkout at end of April, Julien Gonthier, a spokesman for the union, said today.

Union Protests

The two labor groups sought to block Peugeot’s reorganization on the grounds that severance packages accompanying the job cuts were insufficient for employees and that the the carmaker hadn’t respected the legal framework for such measures. Five other unions representing about 75 percent of employees have already signed off on the reorganization.

The CGT reached the settlement today “after the management agreed to hire back four employees who had been fired and to financial conditions that compensate for unpaid days,” Jean-Pierre Mercier, the union’s leader at Aulnay, said by phone. “This is merely a suspension of the strike, as we still consider the plant closing as unacceptable and unjustified.”

Peugeot reported a 576 million-euro operating loss last year, and first-quarter revenue fell 6.5 percent to 13 billion euros. The company is among auto manufacturers forecasting that the European market will shrink by 5 percent in 2013 in the sixth consecutive annual decline.

De Chatillon said last month that Peugeot was preparing for talks with unions about improving competitiveness, declining to specify whether it would widen its job-cut targets. The workforce was reduced by more than 1,300 positions in the first quarter, he said.

The French carmaker’s revival strategy also includes selling businesses that aren’t related to building vehicles and developing a strategic alliance with Detroit-based General Motors Co. (GM) Chief Executive Officer Philippe Varin outlined plans in February to shift the Peugeot brand upscale.

To contact the reporter on this story: Tom Lavell in Frankfurt at tlavell@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.