Bloomberg News

Montebourg Said to Want Peugeot’s Varin to Stay, Seeks New Plan

July 20, 2012

French Industry Minister Arnaud Montebourg wants PSA Peugeot Citroen (UG) Chief Executive Officer Philippe Varin to remain at the helm of the carmaker and to rework a plan for its revival.

Montebourg told Varin of his demands when they met for two hours yesterday in Paris to discuss Europe’s second-biggest automaker’s plan to shut a factory in Aulnay, France, and cut 8,000 jobs on top of 6,000 reductions announced last year, a government official said, declining to be identified according to internal rules.

The minister had said before his talks with Varin that he was skeptical of family-controlled Peugeot’s business strategy, including a model-development alliance with Detroit-based General Motors Co. (GM:US) that resulted this year in the sale of a 7 percent stake in the Paris-based carmaker to the U.S company.

Concern that President Francois Hollande’s government would obstruct efforts by Peugeot to close the factory and cut jobs even though the state owns no stake in the carmaker resulted in its shares tumbling to a 23-year-low this week. The government is scheduled on July 25 to unveil plans to support the country’s automobile industry and stem job losses after France’s jobless claims rose to a more than 12-year high.

The government’s proposals may include support for hybrid cars and an incentive program to boost auto sales, the official and union representatives said.

Peugeot shares rose for a third day today, gaining 0.02 percent to 6.57 euros. The shares have fallen more than 8 percent since the company’s July 12 announcement on job cuts.

Meeting Peugeot

Montebourg was scheduled to meet today with Thierry Peugeot, chairman of the company’s supervisory board, to discuss plans for the Aulnay site. The meeting was postponed to July 26, a day after he is scheduled to unveil the automobile sector plan, the official said.

Varin is scheduled to address lawmakers’ questions about the company’s plan before a parliamentary committee on July 26.

Peugeot’s first-half deliveries slumped 13 percent compared with a 10 percent increase at Volkswagen AG (VOW)’s namesake brand in the period. VW is Europe’s largest automaker. Varin said on July 12 that Peugeot’s factories were running at 76 percent of capacity in Europe and that it has been burning about 200 million euros ($245 million) in operating cash flow a month in the past year.

The French company will stop production at its 39-year-old factory in Aulnay, on the outskirts of Paris, in 2014 and focus the building of small cars at a nearby plant in Poissy, it said. Peugeot will also curb production at a plant in Rennes to slash operational costs. The last French auto factory to close was a Renault plant in 1992.

To contact the reporters on this story: Mathieu Rosemain in Paris at mrosemain@bloomberg.net;

To contact the reporter on this story: Helene Fouquet in Paris at hfouquet1@bloomberg.net


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