PARIS -- PSA could announce the closure of its factory in Aulnay-sous-Bois on July 25, said Gerard Segura, the mayor of the town where the factory is located.
"We are extremely worried that near the end of the month, when the group publishes its results, that it will likely announce its intention to close the Aulnay site," Segura said on Monday at a roundtable organized by industry minister Arnaud Montebourg.
In a document leaked last June, PSA executives had outlined plans to close the Aulnay plant near Paris, which builds the Citroen C3 subcompact. The C3 is scheduled for replacement in 2014.
PSA CEO Philippe Varin later acknowledged that Aulnay's future was in doubt beyond 2014, while insisting no decision had been made.
The mayor said Montebourg planned to meet Varin on Tuesday to discuss the future of the plant where 3,600 people are employed.
Morgan Stanley said today that the closure of Aulnay would be "a clear positive for PSA as it shows clear intent to tackle the problem of overcapacity."
But the analysts warned that the Aulnay closure would not be enough to stem the automaker's cash burn, particularly in light of the inventory build reported in the first quarter and the weak European market conditions.
PSA, which is heavily exposed to European markets suffering under the region's debt crisis, is trying to make big savings through restructuring its operations after net debt at the carmaker increased to 3.4 billion euros at the end of 2011.
As part of this restructuring program, the automaker is targeting 1,900 voluntary job losses in France from a total of 6,000 layoffs in Europe and has embarked on a range of money-raising efforts in 2012 that include the sale of its 48-year-old headquarters building and the issue of 1 billion euros in shares at a 42 percent discount.
PSA also agreed to a partnership with General Motors Co. aimed at reducing purchasing costs and development spending in an effort to revitalize European operations. As part of the deal, GM bought 7 percent of the French carmaker.
But none of those efforts will do much to overcome PSA's overcapacity problem. The manufacturer said its European capacity utilization rate dropped to 83 percent in the first quarter. Its full-year capacity utilization rate will be about 75 percent, according to IHS Automotive estimates.
In the first five months, PSA sold 675,323 cars in the EU and EFTA countries, down 14.9 percent from the same period a year before, according data from industry association ACEA.
Sources: Reuters and Automotive News Europe