French president says PSA job cut plan is not acceptable
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PARIS (Bloomberg) -- President Francois Hollande said PSA/Peugeot-Citroen's decision to close a factory and cut an additional 8,000 jobs is unacceptable and that he will lean on Europe's second-biggest carmaker to renegotiate the plan.
"The plan in the current state is not acceptable, it won't be accepted," Hollande said.
PSA will stop production at its 39-year-old factory in Aulnay, on the outskirts of Paris, in 2014 and focus the building of small cars at a nearby plant in Poissy, it has said. The Paris-based company will also lower production at a plant in Rennes to slash operational costs.
PSA's Aulnay plant could continue to exist as an industrial site, Hollande said.
PSA will shut the first auto plant in France in 20 years and cut a total of 14,000 jobs in an effort to stem widening operating losses, CEO Philippe Varin said July 12. Varin said in an interview on RTL radio Saturday that he was ready to "open the books" to the government to show French labor costs are too high.
No growth
The French economy, Europe's second biggest, failed to grow in the first three months of the year. The Bank of France estimates that it probably shrank in the second quarter for the first time since 2009.
The number of people looking for work in France was 2.92 million in May, more than at any time since 1999. The unemployment rate is 10 percent.
"What's happening at PSA doesn't take us by surprise," Hollande said in an interview published by French newspaper Le Monde. "It's not up to me to call a meeting at the Elysee Palace," his residence and office. "It's the role of the concerned ministers to be socially involved."
The job losses expose French voters to the economic hammer that has already fallen on their southern neighbors in Spain -- where almost a quarter of the work force is unemployed -- as well as bailed-out economies in Greece, Ireland and Portugal.
Declining support
Support for Hollande, who took office on May 15, has dropped 7 points in the past month to 56 percent, according to an Ifop poll published July 11. The survey of 1,005 voters has a margin of error of about 3 percentage points.
"President Hollande needed this like he needed a hole in the head," said Nicholas Spiro of Spiro Sovereign Strategy in London. "There's already mounting pressure on the government to pursue more business-friendly policies. This is not going to help matters."
The CGT union at the Aulnay factory that PSA plans to close has called on the government to intervene. Industry Minister Arnaud Montebourg said the government doesn't "accept the plan as it is."
Prime Minister Jean-Marc Ayrault called the closing and work force reductions a "true shock." Still, any attempt to block the cuts in the short term may backfire, economists and executives said.
"France has to remember that it's in a globalized world and it has competitors," said Frederic Gonand, a professor of economics at Paris Dauphine University and former finance ministry official. "The government shouldn't do things that will discourage investment."
Sales slump
PSA, Renault, France's No. 2 carmaker, and Italy's Fiat have posted the biggest sales declines this year in Europe, where PSA expects the market to contract 8 percent.
Moody's Investors Service in March was the last of the three main credit-reporting companies to cut PSA's debt rating to junk.
"Peugeot is struggling with the power of Volkswagen, especially on the credit side, as VW benefits from lower costs of financing," said Kristina Church, a Barclays analyst in London with an "underweight/neutral" rating on its shares. "More importantly, Peugeot still has an issue with overcapacity and is in a worse position than Renault."
PSA's first-half deliveries slumped 13 percent compared with a 10 percent increase at Volkswagen AG's namesake brand in the period. VW is Europe's largest automaker.
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