PSA Peugeot Citroen plans to shed as much as 10 percent of its French workforce this year, more than previously announced, as sales slide and management seeks further savings, a union official said.
“They will raise the job cuts target in France alone to 8,000-10,000,” Christian Lafaye, the head of Peugeot’s second-biggest union FO, said in an interview. Paris-based Peugeot, Europe’s second-largest automaker, said in November it aimed to reduce headcount by 6,000 in the region.
Chief Executive Officer Philippe Varin told unions last week the carmaker will need to raise its 2012 savings target of 1 billion euros ($1.26 billion), according to Franck Don, a CFTC union representative. Peugeot’s five-month sales in Europe have plunged 15 percent, outpacing a 7.3 percent industrywide drop. The shares last month slid to a 23-year low.
Peugeot may discuss its plans for the carmaker’s reorganization at the next works council meeting July 12, Lafaye said. Pierre-Olivier Salmon, a spokesman for Peugeot, declined to comment. Peugeot employed 100,356 people on permanent and temporary contracts in France at the end of 2011. Worldwide, it had 209,019 workers at the end of last year.
Peugeot climbed as much as 35 cents, or 4.6 percent, to 7.80 euros and was up 3 percent as of 4:51 p.m. in Paris trading today. The stock has slumped 71 percent in the last 12 months, the steepest decline on the 14-member Stoxx 600 Automobiles & Parts Index and valuing the automaker at 2.72 billion euros.
“Some investors are reacting positively to the news that the company is making progress in its restructuring,” said Xavier Caroen, a Kepler Capital Markets analyst in Zurich with a “buy” recommendation on the shares. “The stock has been hit a lot since the beginning of the year, seeing management possibly advancing on this subject is well appreciated by the markets.”
Peugeot’s French factories in Aulnay, which employs 3,300, and Rennes are most at risk of being shut down as cooperation with General Motors Co. adds to pressure, Don said last month. GM announced plans June 14 to shut a factory in Bochum, Germany, at the end of 2016.
“The problem is that you don’t need to resize plants, you just need to close them now,” said Philippe Houchois, an automotive analyst at UBS in London. “By only reducing the size of factories, you may end up having chronically weak plants in terms of profitability.”
The French carmaker set up a strategic alliance with GM in March in which the U.S. automaker became Peugeot’s second-largest shareholder after the founding family. GM paid 320 million euros for a 7 percent stake. Peugeot in March also sold 1 billion euros in new stock to existing shareholders and has announced asset sales, including plans to sell a stake in its profitable Gefco trucking unit.
Peugeot’s revenue per employee in 2011 was 286,634 euros, compared with sales per worker at Volkswagen AG, Europe’s largest carmaker, of 317,432 euros, according to data compiled by Bloomberg. Net income per employee at Peugeot was 2,813 euros versus 30,698 euros at VW.
French Prime Minister Jean-Marc Ayrault pledged in speech today to parliament to come up with a plan by the end of the month to help the country’s automobile industry, without elaborating on the type of aid the government might provide.
Renault Chief Operating Officer, Carlos Tavares, said last month that he would welcome “any kind of measure of support” from French authorities.
“We are completely open and in favor of such a step,” whether it takes the form of incentives for new car buyers or tax breaks for more fuel-efficient vehicles, he said on June 12 at a press conference near Paris.