PSA Peugeot Citroën plans factory closure

PSA Peugeot Citroën intends to halt production at its Aulnay plant and cut 5000 jobs across its French production sites as part of a wide-reaching plan aimed at returning the loss-making company to financial health.

The French company's automotive division is expected to report an operating loss of 700m euros (approximately £550m) in the first half of 2012, and says it will end the six-month period with a net loss.

In response to that negative financial outlook, PSA Peugeot Citroën chairman Philippe Varin today presented a plan to reorganise the company's production base.

PSA's Aulnay facility is one of two in the Paris area that specialise in small car production. Aulnay currently produces the Citroën C3, while the second plant at Poissy makes the Peugeot 208 as well as the C3 and DS3.

Both sites are currently working under capacity. According to Varin's plan, car making at Aulnay, where 3000 people are employed, will cease in 2014 and Poissy will take over all production. Some of the employees will be redeployed at Poissy, while PSA says it will help others find alternative work in the Aulnay area.

On top of the closure of the Aulnay plant, PSA's reorganisation plan also proposes "a reduction of 3600 jobs across all of its facilities in France". Another 1400 jobs would be cut at the Rennes plant, which builds the Peugeot 508 and Citroën C5 and C6 and has been affected by the decline in European demand for large saloons.

The ongoing Eurozone crisis has stifled PSA Peugeot Citroën's attempts to reverse its own financial troubles, and the company's car sales have contracted by 10 per cent in the first six months of the year.

Another factor is the company's major reliance on the small car segment, which accounts for 42 per cent of its overall sales. Most of the competing models in the segment are made in low-cost countries, meaning they can be sold at more competitive prices than Peugeot and Citroën models.

PSA hopes that the reorganisation plan would return its financial situation to the 'break-even' point by the end of the 2014. The group will present its interim 2012 financial results on 25 July.