PSA Peugeot Citroen, Europe’s second-biggest carmaker, will ask French workers to cut overtime pay and accept more flexible working conditions to slash fixed costs, a person briefed on the matter said.
The Paris-based company will meet with unions later today to propose cutting additional overtime pay by 20 percent to 25 percent, and lowering added money for working night shifts by 3 percent to 15 percent, said the person, who asked not to be named because the discussions are private.
The French automaker is seeking about 600 million euros ($792 million) in annual savings by 2016 through its current restructuring plan and these additional measures, the person said. In exchange, Peugeot management would guarantee not to close any additional French plants and keep worker’s base salaries at current levels, the person said.
Pierre-Olivier Salmon, a spokesman for Peugeot, declined to comment.
Peugeot, which posted a first-half operating loss of 510 million euros in its automotive division, plans to eliminate 11,200 jobs in France by 2015 and will close the Aulnay factory on the outskirts of Paris. Chief Executive Officer Philippe Varin pledged to cut the manufacturer’s cash-consumption rate by 50 percent in 2013 after burning through 3 billion euros last year.
Peugeot management will also ask unions to accept more flexible working conditions that would allow the carmaker to have workers stay at home on days when no work needs to be done, the person said.
The effort to lower labor costs and make rules more flexible is reminiscent of moves Volkswagen AG made about 10 years ago, said Erich Hauser, an analyst at ISI Group.
“I don’t think Peugeot is the next VW, but we are starting to see improvements off a low base,” said Hauser.
Peugeot shares rose as much as 4.2 percent, or 45 cents, and were up 3.1 percent to 11 euros at 1:07 p.m. in Paris trading. The stock has doubled this year, boosting the company’s market value to 3.9 billion euros.
The French manufacturer is curbing costs as European car market stabilizes after six years of decline. Peugeot was hit hard by the region’s slump because its sells many of its small, mid-range cars in debt-strapped southern Europe.
The Peugeot and Citroen brands had combined European market share of 11.1 percent in the first half, a decline from 12 percent a year earlier, according to figures from the ACEA carmakers’ lobby.
Peugeot’s competitor Renault finalized a deal in March with unions to cut its French workforce by 17 percent, or 7,500 jobs, by 2016 and freeze wages this year. A majority of Renault’s unions also agreed to increase the average number of working hours from 35 to 32 per week.