Bloomberg News

Peugeot Ordered to Pause Restructuring as Workers Strike

January 29, 2013

Peugeot Must Pause Reorganization While Faurecia Advises Workers

Faurecia, 57 percent-owned by Peugeot, plans to cut about 3,000 jobs in its home region, or 7.5 percent of the workforce, by the end of 2013. Photographer: Antoine Antoniol/Bloomberg

PSA Peugeot Citroen (UG) was ordered by a court to pause its restructuring plans as auto workers across France went on strike to protest industrywide job cuts amid signs the decline in European car demand is accelerating.

Workers burned tires and blocked access to some Renault SA (RNO) factories and protested outside a Peugeot plant in a Paris suburb that is set to close. A court in the French capital said separately that Peugeot can’t eliminate jobs until a parts supplier that it controls tells workers how they may be affected by the automaker’s reorganization.

The two companies are struggling to convince French labor leaders to go along with plans to eliminate 18,700 positions, or roughly 17 percent of their workforces in the country, as Europe’s auto market plunges for a sixth straight year. Ford Motor Co. (F:US) today said the outlook for the region deteriorated in the fourth quarter, forecasting a 2013 loss in Europe of $2 billion, up from an estimate of $1.5 billion.

“The context remains difficult, with declining sales and ongoing overcapacity,” said Florent Couvreur, an analyst at CM- CIC Securities in Paris. “The European car market will go on deteriorating this year and I think it will decrease by about 4 percent.”

Shares Decline

French workers are shielded by labor laws requiring employers to take extensive steps to ensure employees are regularly and fully informed about job-cut proposals. Faurecia SA, 57 percent-owned by Peugeot, was ordered to inform its workers about the impact of Peugeot’s restructuring before the carmaker can implement its plan. Faurecia (EO) is itself aiming to cut about 3,000 jobs in its home region by the end of 2013.

Peugeot dropped 11 cents, or 1.7 percent, to 6.20 in Paris trading. The shares have plunged 50 percent in the last 12 months, valuing Europe’s second-largest carmaker at 2.2 billion euros. Faurecia fell 2.1 percent to 13.39 euros.

Peugeot plans to shrink its French automotive operations by 11,200 positions over the next two years. The automaker is also closing a factory in Aulnay on the outskirts of Paris, selling assets and building a strategic alliance with General Motors Co.

“The effects of the restructuring under way at Peugeot haven’t been the subject of a consultation with the Faurecia” workers, the court said in a ruling dated yesterday. “As a result, there’s grounds to order the suspension of the restructuring” until Faurecia informs its workers.

Worker Protests

About 120 Peugeot workers were on strike in Aulnay, slowing production to about 100 cars as of midday from a normal daily output of about 500, according to Anne-Laure Descleves, a spokeswoman for the Paris-based company.

All six Renault production plants in France were affected by walkouts today as 3,444 employees, or about 8 percent of the French workforce, protested plans to cut 7,500 jobs in the country in the next four years, spokeswoman Sophie Chantegay said.

Renault, whose sales dropped the most in Europe last year, told labor representatives this month it may shutter two French factories unless it can agree with unions on how to increase productivity, rein in pay and cut its workforce, according to the CFE-CGC union.

European auto sales plunged 16 percent in December, bringing the decline for the year in the region to 7.8 percent, according to the Brussels-based European Automobile Manufacturers’ Association, or ACEA. Renault deliveries in the region in 2012 plummeted 19 percent, while Peugeot dropped 13 percent.

Increasing Cuts

The court only ordered Peugeot not to execute the cuts until Faurecia has consulted its workers, and that the ruling “neither suspended and certainly didn’t cancel” the restructuring program, the automaker said in a statement. Faurecia “will undertake this consultation without delay,” it said today.

Europe’s car market is forecast to drop to 12.3 million vehicles this year, 23 percent below the pre-crisis peak, IHS Automotive research company estimates. Automakers across the region have announced 30,000 job cuts since the beginning of July in response to the prolonged slump.

General Motors Co. (GM:US), seeing Germany at risk of slipping into recession, said last week that its Opel brand may shutter a factory in that country two years earlier than planned as the European auto market sinks for a sixth straight year. The factory employs 3,100 workers. Ford is slashing 6,200 positions and closing three plants in the region.

“The business environment remains uncertain, and Ford will continue to monitor the situation in Europe and take further action as necessary,’ the U.S. automaker said today.

To contact the reporters on this story: Heather Smith in Paris at hsmith26@bloomberg.net; Mathieu Rosemain in Paris at mrosemain@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net; Anthony Aarons at aaarons@bloomberg.net


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