Facing falling sales in Europe, French carmaker PSA Peugeot-Citroen has unveiled plans to cut costs by 125 million euros in the second half of this year. With disappointing sales of new models, like its 1007, Europe’s second-largest motor manufacturer has missed its profit targets three times in the past year.
The company has blamed rising raw materials costs, weak European sales and fierce competition. Chief Executive Jean-Martin Folz is due to retire at the end of the year and this is his last attempt to turn the company around. Peugeot will freeze hiring and cut its European workforce by 7%, 10,000 jobs will go, partly by not replacing people who leave or retire. It will reduce its investment and development spending by 20%. Among the cuts already announced is the closure of a factory at Ryton in central England.
In France, union official Jean-Pierre Kerling said: “People are anxious. They are scared about future investment and overheads and the recruiting freeze affecting permanent staff and those on temporary contracts who had hoped to be taken on.”
The company is also cancelling construction of a second assembly plant at its facility in Slovakia, which will save 200 million euros. This cost-cuts announcement, on the eve of the Paris Motor Show, is another sign of the vulnerability of Western European and US carmakers facing strong competition from Asian rivals and weak demand in their home markets.