PSA/Peugeot Citroen wants to shut down its plant in France, government opposes

Article by Christian Andrei, on July 24, 2012

With the belief that Europe’s auto market won’t be able to recover in time, PSA/Peugeot Citroen wants to shut down its plant in France. However, the French government is opposing this move as it aims to preserve jobs. A meeting has been set between automakers’ officials and French Industry Minister Arnaud Montebourg to talk about emergency measures for the auto industry.

Among the managers who will attend this meeting are PSA head of brands Frederic Saint-Geours and Renault Chief Operating Officer Carlos Tavares. Because of the persistent decline in Europe’s auto market, PSA (the No. 2 automaker in the region) was forced to present its plans on July 12 to close down its factory in the Paris suburb of Aulnay within two years.

This move cuts 14,000 jobs. This move is “unacceptable” to French President Francois Hollande who hopes to outline a program to aid the industry on July 25. In an interview, Daniel Goldberg, the Socialist Party parliamentarian who represents Aulnay, said that there has been a total absence of “confidence and dialog" between Peugeot and French politicians. He said that the elected officials and the unions want to be “responsible” but they’ve lost confidence even as they realize what the state of the economy is.

Last April, Renault CEO Carlos Ghosn said that governments in Europe have to permit automakers to reorganize and trim down their work forces to put a stop to the weakening industry. On July 11, the automaker forecasted that Europe's car market may not recover and reach the levels of its 2007 peak until 2018.

Renault is 15% owned by the French state. Xavier Caroen, an analyst at Kepler Capital Markets with a hold recommendation on both Peugeot and Renault, said that the program that Hollande will show on July 25 may be targeted at small suppliers first since they have been affected the most from their exposure to French manufacturers. He added that Renault isn’t interested in asking aid from the state as it’s expected to maintain its operational margins in 2012.

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