Peugeot needs urgent restructuring

Wednesday, September 12, 2012    

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PARIS, France - FRENCH auto giant PSA Peugeot Citroen was warned it must restructure urgently yesterday, and tie up with a global group after posting sweeping losses due to strategic errors over two decades.

A damning government-sponsored report said Europe's second-biggest automaker after the VW group and which recently entered a limited alliance with General Motors of the United States, had missed the bus on globalisation.

A restructuring was inevitable and the firm had to "act urgently to get on top of the situation," the report by government expert Emmanuel Sartorius said.

"The need, in principle, for a plan to reorganise industrial activities and reduce the workforce cannot be challenged unfortunately."

It said that "in the medium and long term, the future of PSA lies in a strategy of an alliance with a big world automaker".

The report was commissioned by the new socialist administration of President Francois Hollande against the background of a plan by the group to close a landmark plant north of Paris and shed 8,000 jobs across France.

French Minister for Industrial Renewal Arnaud Montebourg, who had attacked the job cuts and PSA's corporate strategy, had conceded that it was "really in trouble" and needed "restructuring", a union official told AFP.

Franck Don from CFTC union said Montebourg would propose tripartite meetings between the state, union officials and the management to "review" the mass lay-offs and other plans.

"Therefore his position in July has been totally forgotten," he said.

The company was known to be experiencing pressing financial strains, but the announcement of the cutbacks soon after the new government was elected came as a shock and caused considerable uproar in France.

The report said the company was too dependent on the European market, which still accounts for 50 per cent of its sales.

Its position as a general car maker added to its difficulties given that eastern Europe led in the production of cheaper models and Germany dominated in higher-end and luxury cars.

The government has signalled strongly that it wanted the restructuring measures to be diluted, in a context where relaunching manufacturing activity in France is a policy priority.

The report, revealed to trade unions yesterday, severely criticised management and shareholders for their strategy in the past, but appeared to support the company's general line that there is no alternative to deep restructuring.

PSA Peugeot Citroen, which is not controlled by the French state and in which the Peugeot family keeps a strong voting interest, has dropped out of the Paris CAC 40 leading stock index and been beset by poor sales.



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