September 13, 2012 / 10:33 AM / 6 years ago

French minister: Peugeot should cut in Spain, not just France

PARIS (Reuters) - France’s industry ministry is pressing the country’s leading carmaker to limit the impact of a domestic restructuring set to claim 8,000 jobs - by shifting part of the cuts burden to Spain.

The Peugeot logo is seen on a car at a dealership of French car maker PSA Peugeot-Citroen, Europe's No. 2 automaker by volume, in Selestat, eastern France, September 7, 2012. REUTERS/Vincent Kessler

Arnaud Montebourg, industrial renewal minister, was expected to raise the issue in talks on Thursday with PSA Peugeot Citroen (PEUP.PA) chief executive Philippe Varin over a plan that involves shutting the firm’s historic Aulnay plant near Paris.

“It’s not just Aulnay. A production line is also set to be lost in Rennes, while the Madrid plant is being kept open,” said Montebourg, charged by the Socialist government with leading efforts to coax Peugeot into a rethink.

A spokesman for Spain’s industry ministry said the decision over where the cuts would fall was a matter for a private company and declined to comment further.

But Montebourg’s proposal is likely to go down badly in recession-scarred Spain, where the government of Mariano Rajoy is close to seeking a sovereign debt bailout as it battles to bring down the European Union’s highest unemployment rate of just under 25 percent.

Montebourg repeated the government’s line that the firm’s shakeup plan was “unacceptable” as it was and kept up pressure for tweaks.

“We are going to have a debate with Peugeot management about opportunities and choices. Personally I prefer that the emphasis is put on closures outside France rather than inside France,” he told public radio station France Inter.

Peugeot was not available for comment.


Peugeot announced the job cuts in July in response to mounting losses at its core automotive division.

A government-appointed expert this week faulted the decision to close the French operations while sparing the plant in Madrid.

Emmanuel Sartorius presented a report that acknowledged the need for capacity cuts in response to weak demand, noting that the firm’s small-car plants were running at just 61 percent of maximum output on average last year.

Its conclusions are not binding for Peugeot. The company’s works council has mandated a private auditor to produce a separate report on its restructuring plans at the end of November that will make recommendations to limit job losses.

“It’ll be hard to save Aulnay and we are not trying to hide that,” said Montebourg, who stood out in the run-up to elections in May and June as a staunch critic of industrial globalization.

The outspoken 49-year-old, a lawyer by profession, landed his ministerial portfolio after an election campaign in which industrial decline and France’s record trade deficit featured prominently.

With the French economy at a standstill, unemployment at a 13-year high and labor unions warning that tens of thousands of jobs face the axe in the months ahead, he is under pressure to produce results.

“We’re not going to break (Peugeot’s) door down. But when there’s a national drama like this one we’re telling them there are a number of concessions that need to be made and mistakes to be admitted, because there were mistakes and the management bears responsibility for that,” he said.

Peugeot hopes its restructuring plan will get it out of a bind caused in part by dependence on the Italian and Spanish markets, which have been battered by the euro zone debt crisis, and its slowness in expanding internationally.

But boss Varin urged the government earlier this year to focus on lowering the cost of labor in France.

The carmaker is being squeezed between mass-market competitors building cars in countries with lower costs, such as in eastern Europe, and premium German automakers attacking the middle-range market.

Reporting By Brian Love, Additional reporting by Robert Hetz in Madrid; Editing by John Stonestreet

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