French carmaker PSA Chairman Philippe Va

The outgoing chief executive of PSA Peugeot Citroën has given up pension benefits worth €21m, amid criticism from union leaders and senior government figures over the size of the payout.

Philippe Varin, who has been chief executive since 2009, said he would abandon his pension rights, adding that the circumstances in which he was granted them in 2010 were “very different from today”.

In the years since then, the company has been hit by the worst European car market in two decades, bleeding cash and losing market share. This year, European deliveries fell 10 per cent, far worst than the wider market.

Under Mr Varin’s tenure, Peugeot has announced a plan to eliminate 11,200 jobs and freeze wages in a bid to stem losses and cut industrial overcapacity. Last year, he oversaw the closure of the first large factory in France for 30 years.

The CGT union drew attention to his pension entitlement on its website, linking to a 2012 Peugeot Registration Document highlighting a pot of just under €21m.

Jean-Pierre Mercier, the head of the CGT union at Peugeot’s Aulnay factory, denounced the pension package as a “scandal” and “shocking” – and called on Mr Varin not to take the money.

Mr Varin initially suggested that the controversy was based on “misconceptions”, saying the €21m pension provision made by Peugeot would amount to €310,000 a year after taxes and social security, and would not come as a lump sum.

However, on Wednesday, he bowed to pressure, saying: “Given the immense respect I have for our company’s staff and the consequences of the difficult but necessary decisions I had to take, I have decided to renounce on the current dispositions of my pension package.”

He added that the company’s supervisory board would decide on what would be the “appropriate” conditions of his departure.

Both finance minister Pierre Moscovici and industry minister Arnaud Montebourg had earlier slammed the multimillion-euro package as “inappropriate” and called for “serious explanations”.

“Obviously the company’s situation needs to be taken into account, the sacrifices that have been made by employees and the fact that the state provided a guarantee of €7bn for PSA bank,” said Mr Moscovici.

The controversy follows news earlier this week that Mr Varin would next year be replaced by Carlos Tavares, the former number two at Renault.

Mr Varin is spending the remaining months of his leadership looking for partners to help Peugeot expand internationally and reduce its reliance on the moribund European market.

The group is in talks with Chinese carmaker Dongfeng with a view to a potential capital increase.

But, as a Chinese investor may prove politically sensitive, the government is weighing up taking a stake to maintain French control, according to people close to the discussions.

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