Peugeot Sees European Car Market Stabilizing at Low Level

PSA Peugeot Citroen (UG), Europe’s second-biggest carmaker, said demand for new vehicles in the region has started to stabilize at a “very low level” after deliveries increased in April for the first time in 19 months.

Competition is “very, very aggressive” as many carmakers are granting “lots of incentives,” while “we’re quite happy with our own price position,” Maxime Picat, head of the manufacturer’s Peugeot brand, said today in an interview in the town of Grevenbroich, outside Dusseldorf, Germany.

European car sales rose 1.8 percent in April, the first gain since September 2011, adding to signs that the region’s economic woes may ease. Even so, the auto market is near a two-decade low. Picat reiterated the Paris-based manufacturer’s forecast that industry sales in Europe will fall 5 percent this year in the sixth consecutive annual decline, and said it’s too early to predict a rebound.

Peugeot Citroen Chief Executive Officer Philippe Varin laid out plans on Feb. 13 to return the group to profit as an upscale shift of its main brand and cooperation with General Motors Co. (GM) add to the effects of spending cuts. Cars from the Peugeot division will be upgraded to differentiate them more from Citroen models, and average volume is anticipated to double through the alliance with GM, he said at the time.

New Models

Picat said today that he’s “very confident” of sales being supported by new models such as the Peugeot 208 small car, 2008 compact sport-utility vehicle and a new version of the 308 coming out later this year to compete with market leader Volkswagen AG’s bestselling Golf hatchback.

Peugeot fell as much as 2.5 percent to 7.33 euros and was trading down at 1.3 percent at 3:47 p.m. in Paris. The stock, which was at a 10 1/2-month high two days ago, has gained 36 percent this year.

The contraction in Europe’s car market, which accounted for 62 percent of Peugeot’s deliveries in 2012, pushed the group to an operating loss of 576 million euros ($745 million) last year as the company consumed 3 billion euros in cash. Peugeot’s reorganization includes measures to reduce its French workforce 17 percent through 2014, with a target of cutting cash burn 50 percent in 2013 and breaking even next year.

Peugeot reached a deal with a striking union last week on terms for closing a car factory in France, removing one of the last obstacles to its target of eliminating 11,200 jobs in the country. The company said today that it plans to open talks with labor leaders on May 29 on boosting efficiency from remaining employees.

The manufacturer will shut a French research and development facility and relocate most of its 660 employees to nearby sites, with no job cuts planned, Cecile Damide, a spokeswoman, said earlier today.

Cooperation with Detroit-based GM, which owns the Opel and Vauxhall brands in Europe, is targeted at developing and producing cars the manufacturers plan to begin selling in 2016, the companies said in January. The French and U.S. carmakers have also teamed up in purchasing to reap economies of scale. The alliance is proceeding as planned, Picat said today.

To contact the reporters on this story: Christoph Rauwald in Grevenbroich at crauwald@bloomberg.net; Alex Webb in Munich at awebb25@bloomberg.net

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

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