Peugeot-Citroen Planning 8,000 Job Cuts

Europe's second-largest carmaker details cost-cutting plan to improve profitability; working on entry level models targeted at China, Russia and South America.

PARIS (AP) — PSA Peugeot-Citroen plans to cut costs — and up to 8,000 jobs in Europe — and focus on selling cars in emerging markets in an effort to improve profitability.
 
The job cuts would represent nearly 12 percent of its European work force.
 
Europe's second-largest carmaker has suffered four years of sliding profitability, because sales failed to meet expectations earlier in the decade and chronic overcapacity.
 
The plan drawn up by Chief Executive Christian Streiff and disclosed Tuesday sets a target for boosting its operating margin to between 5.5 percent and 6 percent by 2010, compared with 2.7 percent in the first half of this year.
 
Profitability is slated to continue improving, reaching between 6 percent and 7 percent between 2010 and 2015.
 
Streiff said the cost-cutting plan would include a hiring freeze in Europe, where labor costs are highest. That would cut the European work force by up to 8,000 jobs, mainly through early retirement and voluntary departures.
 
Peugeot-Citroen employes about 211,000 people worldwide, including 68,000 in Europe.
 
It also intends to cut in half the cost of guarantee claims, improve the productivity of its purchasing, reduce fixed costs and development costs, cut logistics costs, and improve capacity utilization.
 
While Peugeot-Citroen has previoulsy said it didn't believe in producing low-cost cars specifically aimed at emerging markets, Streiff indicated Tuesday that this may be changing. The company is working on ''entry level'' models targeted at China, Russia and South America, he said.
 
The company is targeting sales of 4 million vehicles a year by 2010, compared to 3.37 million in 2006, fueled by a major effort to rejuvenate its model lineup.
 
The company is looking to boost sales outside the mature European market. It plans to double its sales in Latin America to 400,000 a year. It is targeting 1 million annual sales in China by 2015 and plans to build a new plant there with its local partner Dongfeng Motor in 2010.
 
A joint venture with another local partner, Hafei, is under way and should lead to the construction of a third manufacturing facility in southern China, the company said.
 
In Russia, Peugeot-Citroen is targeting sales of 100,000 by 2010. In western Europe, where Peugeot-Citroen sells the bulk of its cars, the company plans to sell 300,000 more cars annually by 2010.
 
It plans to launch vehicles powered by hybrid diesel engines in 2010 and equip all products with Stop & Start systems that reduce emissions and fuel consumption by stopping a car's engine when it is not moving.
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