PSA widens French work force cutbacks

PSA already aims to cut 17% of its domestic work force by the end of this year.
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PARIS (Bloomberg) -- PSA/Peugeot-Citroen says it is widening work force cutbacks with early retirement packages targeted at encouraging as many as 3,500 employees in France to leave by 2016.

The early retirements come on top of PSA's plan to eliminate 11,200 jobs in France, or 17 percent of the company's domestic work force, by the end of this year.

The three-year labor agreement signed in October, which also freezes pay and sets terms for work-hour flexibility for remaining employees, will prevent further large-scale firings as a means of offsetting low capacity usage at PSA's plants, Philippe Dorge, head of human resources at PSA, said in an interview on Monday.

"We're estimating the number of senior workers signing up for the plan this year at about 950," Dorge said. "We have talked with unions, which fully understand that the situation is serious, and we now have a toolbox to address these problems."

PSA laid out plans in October to eliminate 2,500 to 3,000 jobs through voluntary departures as part of a contract reached with four unions. The manufacturer, which according to analyst estimates probably lost money in 2013 for the second year in a row, also shuttered a car factory near Paris last year as part of a wider reorganization plan.

Employees taking part in the early retirement program will be allowed to work part time at PSA for two to three years at 70 percent of their full-time pay before leaving the company, according to the contract.

Keeping targets

PSA is "on track" with the head-count reduction, and it is likely to reaffirm a 125 million euro savings target for 2014 stemming from the deal when it releases figures for 2013 in February, Dorge said. The company's automotive unit posted a first-half operating loss of 510 million euros ($697 million).

PSA forecast that cash consumption, which amounted to 3 billion euros in 2012, probably totaled 1.5 billion euros last year. It's targeting break-even on that basis in 2014.

In addition to cutbacks such as closing the car plant in the Paris suburb of Aulnay, PSA is seeking to add to its model lineup to win back customers.

It is also considering a two-step capital increase of 3 billion euros to shore up financing that may involve selling stakes to the French state and Dongfeng Motor Corp., PSA's largest Chinese partner, the carmaker said on Jan. 20.

PSA committed in the union contract to produce 1 million vehicles in France in 2016 and keep its factories in the country open during the period. The French plants, currently running at 67 percent of capacity, have a goal of reaching full production by 2016, Pierre-Olivier Salmon, a PSA spokesman, said. Experts says that a plant needs to produce at 75 percent to 80 percent capacity to break even.

Two working groups are assessing whether to close one of two assembly lines at the factories in Poissy and Mulhouse to improve efficiency, Dorge said. They'll publish their conclusions before the end of this quarter, he added.

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