France president says PSA’s plant closure and job losses are inevitable

Article by Anita Panait, on September 13, 2012

The French government, headed by President Francois Hollande, has changed its tone over the decision of carmaker PSA/Peugeot-Citroen to shut down its Aulnay plant near Paris and cut around 8,000 jobs. In July 2012, Hollande said in a televised interview that PSA's plan to close the factory and cut jobs "is not acceptable in its current form."

Two months later on Tuesday, a report commissioned by the French Industry Ministry said that given the flat European car market and PSA's excess capacity, the carmaker “must absolutely cut costs," adding that the closure of the Aulnay plant is “inevitable.” Hollande’s change of tone over PSA’s cost reduction plan marks a huge turnaround for the French president, who was elected in May on a promise to block a "parade of firings." Since then, the number of unemployed people in the country reached 3 million, marking a 13-year high.

Aside from PSA, several companies like Air France-KLM Group and retailer Carrefour SA have announced lay-offs. Sascha Gommel, an analyst at Commerzbank, said that shareholders perceive as a good thing the French government’s acknowledgment of the fixed-cost problem in PSA.

Gommel, however, warned of a political backlash on the recent development, noting that it was typical of any country when a company shuts down a plant. During a meeting with PSA union officials, Industry Minister Arnaud Montebourg said that the French carmaker was facing severe difficulties and needed to restructure, according to Franck Don, a CFTC PSA union official. PSA’s automotive division has been using up around EUR200 million a month for 2011, chief executive Philippe Varin divulged in July.

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