April 18 (Bloomberg) -- PSA Peugeot Citroen, Europe’s second-biggest carmaker, may shut its plant in the Paris suburb of Aulnay as early as this year because strikes are disrupting production, according to two people familiar with the matter.
Peugeot is considering closing the factory as soon as September, according to the people, who asked not to be named because no decision has been made yet.
The carmaker outlined plans last year to stop manufacturing at the Aulnay site, which employs about 3,300 full-time workers and builds the Citroen C3 compact car, at an unspecified point in 2014 in a reorganization aimed at restoring profit as the European auto market shrinks. Paris-based Peugeot, which reported a 576 million-euro ($753 million) operating loss in 2012, has been selling businesses and has a two-year plan to eliminate 11,200 jobs, or 17 percent of its French workforce.
“The intention of Peugeot management is to go on producing the C3 at Aulnay to satisfy the demand of its customers while accompanying its workers in their transition to other careers,” Jean-Baptiste Mounier, a spokesman for Peugeot, said today by phone, declining to comment further.
Manufacturing at Aulnay has been hampered by a strike held by the CGT labor union since Jan. 16. The plant is now making 40 to 50 vehicles a day, Anne-Laure Descleves, a Peugeot spokeswoman at the site, said by phone. That’s as little as 16 percent of the factory’s current daily capacity of 250 cars.
Peugeot fell as much as 0.7 percent to 5.30 euros and was trading down 0.1 percent at 3:24 p.m. in Paris. The stock has dropped 2.6 percent this year, valuing the manufacturer at 1.89 billion euros.
The company’s first-quarter sales in Europe fell 15 percent to 345,258 vehicles, the second-worst performance among the region’s main carmakers, according to industry figures released yesterday. The European auto market contracted 9.7 percent in the period, led by a 20 percent sales plunge at Ford Motor Co. Registrations at Volkswagen AG, the regional market leader, fell 7.6 percent.
Car producers in Europe are planning more than 30,000 job cuts and five plant shutdowns in response a sixth consecutive year of declining sales. That won’t be enough to reduce chronic excess capacity in the region that Fiat SpA Chief Executive Officer Sergio Marchionne has estimated caused an industrywide loss of about $7 billion last year.
Production this year in Europe, including Russia, may total 18.7 million cars compared with capacity of 26.1 million units, according to data from IHS Automotive consulting company. That means automakers are building 7.4 million, or 28 percent, fewer cars than they’re set up to manufacture.
“Capacity cuts are still needed in Europe,” said Michael Tyndall, an analyst at Barclays Plc in London. “Carmakers have recently stepped up the pace of closures, but I think this actually makes it difficult for them to announce further cuts until the planned closures are finalized.”
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