Last updated: July 12, 2012 1:04 pm

Factory closure a result of overcapacity

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments

The PSA Peugeot Citroën plant in Aulnay has been seen as a candidate for closure since last year, when the French media published an internal document showing the company was considering it.

Philippe Varin, chief executive, warned in an interview this year that Peugeot needed to address its overcapacity problem, and said that France was saddled with higher labour costs than Germany.

Car plant closures have until now been a rarity in Europe because of political and union pressure on an industry seen as core in most countries. France’s government bailed out Peugeot and Renault with low-interest loans worth €6bn in 2009 on the express condition that they preserve jobs and keep plants open in their home country.

Peugeot, like western Europe’s other carmakers, is burdened with the legacy of an industrial base centred largely on its shrinking home market at a time when all of its sales growth is coming from emerging markets on other continents.

French president François Hollande’s administration has already expressed concern about the effect of restructuring plans at PSA, which is one of the country’s largest employers and exporters and Europe’s second-largest carmaker by sales after Germany’s Volkswagen.

Until now Peugeot has dealt with its capacity overhang in France by trimming jobs and boosting efficiency at its plants – a process it calls compactage – rather than take the political heat of trying to close one.

However the sharp slowdown in car sales is now forcing it and other carmakers to confront the issue. General Motors said last month that its plant in Bochum, Germany would close by 2017, and Fiat and Ford Motor are also said to be considering shutting plants.

The closure of the Aulnay plant will be the first seen in France since Renault shut its factory in Boulogne-Billancourt, on the outskirts of Paris, in 1992.

Peugeot said on Thursday that capacity utilisation at its European plants fell to an average of 76 per cent in the first half of this year, from 86 per cent a year ago. In the car industry, 75-80 per cent is seen as the minimum utilisation needed for profitability.

Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments

NEWS BY EMAIL

Sign up for email briefings to stay up to date on topics you are interested in

SHARE THIS QUOTE