Peugeot’s French Restructuring Plan Cleared by Court

PSA Peugeot Citroen, Europe’s second-largest automaker, can move forward with the elimination of 11,200 jobs and a factory closing after a French court threw out a legal challenge from two unions to the plan.

“The plaintiffs don’t formulate any precise criticism of the planned measures and thus don’t prove there is any lacking element,” Judge Anne Lacquemant said in her ruling today in Paris rejecting the suits.

Peugeot, which reported a 576 million-euro ($750 million) operating loss last year, said this week that first-quarter revenue fell 6.5 percent to 13 billion euros. The European car market may drop 5 percent in 2013, the automaker forecast.

Peugeot aims to shrink its French automotive workforce by 17 percent over the next two years in response to the downward spiral in European auto sales, which are set to decline in 2013 for the sixth straight year. The automaker is also closing a factory on the outskirts of Paris, selling assets and building a strategic alliance with General Motors Co.

The CGT and SUD unions sought to block the carmaker’s restructuring plan on the basis that the severance packages accompanying the job cuts were insufficient for employees and that the legal framework for such measures hadn’t been respected by the carmaker.

“The court decided to only take into account the arguments of Peugeot,” Marie-Laure Dufresne-Castets, a lawyer for the CGT, said. “But we will appeal.”

Shares Drop

The shares declined as much as 24 cents, or 3.8 percent, to 5.91 euros and were down 1.1 percent as of 3:14 p.m. in Paris trading. The stock has gained 11 percent this year, valuing the automaker at 2.15 billion euros.

A meeting to set the financial terms for the reductions is now set for April 29. Five other unions representing about 75 percent of employees have signed off on the reorganization.

“This decision will allow the pursuit of the project of industrial reorganization of the group and its implementation after the next meeting of the works council,” Pierre-Olivier Salmon, a Peugeot spokesman, said by telephone.

Car producers in Europe are planning more than 30,000 job cuts and five plant shutdowns as the region’s auto demand heads for a 20-year low. That won’t likely 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 a year.

Aulnay Closing

Chief Financial Officer Jean-Baptiste de Chatillon said this week that the Aulnay site, scheduled to be shut next year, may be closed as early as 2013 as strikes disrupt production. A further contraction in Europe’s automotive market in 2014 may also make new savings measures necessary, he said.

Manufacturing at Aulnay has been hampered since January because of a strike by the CGT labor union. The plant is now making 40 to 50 vehicles a day, Anne-Laure Desclesves, a Peugeot spokeswoman at the site, said last week. The factory’s daily capacity is 250 cars.

“The fight goes on,” said Jean-Pierre Mercier, deputy head of the CGT at Peugeot. “The strike will continue and intensify at Aulnay and we will multiply actions.”

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