COVENTRY, UK - PSA/Peugeot-Citroen will spend £100 million ($162 million) at its plant in Ryton, UK, to prepare for production of the T1 project - the 206 supermini.
Production will start simultaneously in the UK and France in September 1998. The plant will get a 6,000 square meter body-in-white facility, improvements to the paint shop and more robotic equipment over the next two years.
'Even before the new three- and five-door cars arrive, I want to drive our business forward again,' said Managing Director Richard Parham. 'We broke the £2 billion sales barrier for the first time last year, but I believe our range deserves higher sales.'
Ryton currently builds the 306 lower-medium class car. Production last year increased 8 percent to 85,751.
Ryton unions recently accepted a new pay and conditions contract.
Workers got a 5 percent pay increase. In return, the 2,500 workers gave up the traditional 39-hour week, in favor of an annual contract totalling 1,755 hours, based on a four-day week.
The deal gives Ryton a new level of production flexibility and will make the company more competitive in the marketplace, said Parham.
'We've had lots of calls from other makers about the working conditions package,' said Parham. 'It is the biggest step we've ever taken in cost-efficiency.'
The deal allows line work to change with demand. It will add 12,500 cars to annual output and introduces a four-day week.
'The last part holds the biggest key to our future success,' said Parham. 'It means workers come in for 185 days a year and have seven weeks' vacation. But it also means our plant is now idle from 4pm on Thursday to 4pm on Monday. We save overhead because it is shut down, but we can also use the time to introduce extra working with new staff if we need it.
'Those three days could take our current weekly capacity of 2,500 cars up to 4,000 with very little additional investment. It's a major new opportunity for us.'
Parham said the flexible working idea would save PSA a lot of money in future.
'For example, our planned growth means we will need a new paint shop in 2005,' said Parham. 'Under our old working system, it would have needed two lines to handle 4,000 units each week.
'With the new system, we can handle the volume with one line, so we'll save 40 percent on an investment of £60 million.'
Peugeot's wholly owned UK subsidiary delivered pre-tax profits of £30.5 million last year - almost half the total earnings of its French parent.
The UK subsidiary earned £4.9 million in 1995.