BEIJING/PARIS -- PSA Group and partner Dongfeng Motor have agreed to cut thousands of jobs in China and drop two of their four shared assembly plants, according to a document seen by Reuters, in a last-ditch bid to curb mounting losses as the world's largest auto market loses steam.
Dongfeng Peugeot Citroen Automobiles (DPCA), the automakers' joint venture based in Wuhan, central China, will halve its workforce to 4,000 as it closes one plant and sells another under plans agreed last month between PSA CEO Carlos Tavares and Dongfeng Chairman Zhu Yanfeng, the document showed.
Both automakers declined to comment on details of their restructuring plans.
"We are working with our partners to improve the overall performance of our business in China in all its dimensions," a PSA spokesman said.
Cutting jobs and closing plants may avert a threatened withdrawal from China by PSA, according to two Reuters sources at PSA. They said Tavares had signaled that PSA might otherwise exit the 27-year-old partnership with Dongfeng, or even leave China altogether.
"We are just a whisker away from having to withdraw from China," said one person close to the PSA board. "It really is that serious."
PSA is attempting a reboot in adverse conditions. Once an auto industry cash cow, the Chinese market contracted last year for the first time since the 1990s and is expected to decline another 5 percent in 2019, squeezed by a worsening U.S.-China trade war.
Many Western automakers were already struggling before the downturn, as Chinese consumers abandoned their mid-market brands for increasingly assertive domestic rivals including the global manufacturers' own local partners.
PSA's deep China problems go back even further, spanning four years of plunging sales and 400 million euros ($450 million) written off its DPCA stake, which is now valued at 500 million euros.
Its sales in the country have fallen almost threefold to 251,700 vehicles last year from a 2014 peak of 731,000.
"We're not giving up," a PSA spokesman said. "We are still pursuing our action plan to cut fixed costs."
DPCA will now close its original assembly plant, Wuhan 1, and redevelop the site in a commercial partnership with the local government, according to the plans. The factory's tooling and production will be transferred to the Wuhan 3 facility.
Headcount across DPCA will fall to 5,000 from 8,000 by the end of 2019 and to 4,000 within another three years, as it also sells off its idling Wuhan 2 facility, according to the document -- which noted ongoing discussions with unidentified potential buyers.
Underperforming vehicles will be dropped as the Peugeot and Citroen lineups are streamlined around more profitable models, mirroring the European turnaround strategy now powering record margins in PSA's home markets.