October 08, 2012 01:00 AM

Peugeot cuts production of 208 subcompact on weak European market

Bruce Gain

RENNES, France -- PSA/Peugeot-Citroen is cutting output of the Peugeot 208 subcompact because of slowing demand in Europe's weak auto market.

Peugeot is reducing production and its sales outlook for the 208, a company spokesperson told Automotive News Europe on Monday without giving further details.

The spokesperson could not confirm media reports that Peugeot plans to sell 140,000 units of the 208 this year instead of the 175,000 it had planned.

On Friday, the Wall Street Journal reported that Peugeot will reduce the hourly production rate of the 208 at its factory in Poissy, west of Paris, to 35 from 52, starting on Oct. 10 and cancel one of the Poissy plant's three shifts in early December.

A representative from the CGT union told Automotive News Europe that Peugeot will cut its night shift for the production of the 208 at Poissy at the end of November.

Peugeot also plans to eliminate 850 temporary worker positions at the site by the end of the year, the union representative said.

The Peugeot spokesperson said the brand still expects to have a share of 10 percent in the subcompact segment in Europe by the end of next year, but said overall industry volumes in the sector should be lower compared with forecasts from earlier this year.

Earlier this year, Peugeot forecast that it would sell 550,000 units of the 208 worldwide and 420,000 units in Europe in 2013.

Deutsche Bank analyst Gaetan Toulemonde said 208 sales have been hit by the economic downturn.

"The overall Europe market is weak and the second half of this year will be weaker than what was expected a few months ago," Toulemonde said. "It is unfortunate that the car was launched at a time when the market was so weak."

Peugeot launched the 208 in April. The brand sold 74,487 units of the model in Europe up to the end of August, according to market researchers JATO Dynamics. JATO data ranked the 208 as Europe's third best-selling car in Europe in August after the VW Golf and VW Polo with sales of 14,721 for the month.

PSA is closing its factory at Aulnay near Paris and cutting jobs as its European sales fall heavily during the eurozone crisis.

The automaker's passenger car registrations were down 13.4 percent to 1.03 million in the EU and EFTA markets in the first eight months in a total market that fell 7 percent to 8.6 million, according to industry association ACEA. Peugeot brand sales were down 14.5 percent to 551,379 while Citroen's volume declined 12 percent to 473,861.