Peugeot to make deeper cuts after 819m euro loss
- 25 July 2012
- From the section Business
Struggling French car firm Peugeot has reported a six-month loss of 819m euros (£638m) on the day the French government unveiled a support plan for the industry.
The firm said sales in the six months to the end of June had fallen by 5.1%.
Peugeot, which made a profit of 806m euros in the first half of 2011, said it would not break even until 2014.
The company, which is Europe's second-biggest carmaker, is in the process of cutting 8,000 jobs.
Peugeot, whose loss was twice the amount expected, is also closing one of its two Paris production sites.
The government's recovery plan for the industry increases a consumer bonus for buyers of electric and hybrid cars and gives assistance totalling 500m euros to businesses in the sector.
The scheme is part of the government's goal of reindustrialising the eocnomy.
The French car industry employs almost 600,000 people, almost 100,000 of these by Peugeot.
Meanwhile, in contrast, results from rival German carmaker Daimler were described by the company as "very good", despite a fall in profits of 11%.
Daimler, which also makes Mercedes-Benz, has been investing in new models and has outsourced production of certain marques because its own factories are running at full capacity.
Peugeot's plants are operating at 76% of capacity. It is suffering in part because of its exposure to countries badly affected by the eurozone crisis in southern Europe.
"The depth and persistence of the crisis impacting our business in Europe requires the launch of the reorganisation," said Peugeot's chief executive Philippe Varin.
"We have a clear understanding of how hard this project is for a large number of our employees."
The carmaker has cut its debt by 1bn euros since the end of last year, but still has debts of 2.4bn euros.
Peugeot says the closure of the Aulnay factory near Paris will save 600m euros, while it will cut another 550m from investment and save a further 350m through a recently-announced alliance with General Motors.
The Peugeot cuts programme is politically sensitive in France, with unions referring to it as a "declaration of war".
French President Francoise Hollande called the restructuring "unacceptable", while Peugeot's chairman, Thierry Peugeot, said that criticism of the company had weakened investor confidence and left it vulnerable to hostile takeover bids.
Peugeot family members control the carmaker through a 25.2% stake commanding 37.9% voting rights.
Earlier this week, Mr Varin met the French prime minister for talks.
The carmaker also signed a deal earlier this week with Toyota, under which it will start building commercial vans next year at its plant in Sevelnord in northern France.
However, that deal rests on unions at Sevelnord agreeing to changes in working conditions, including a pay freeze and reduced leave, as well as hundreds of possible job cuts.
At least 2,000 Peugeot employees protested about the job cuts outside the company's headquarters on Wednesday after marching through Paris.
French Industry Minister Arnaud Montebourg, who has already met Mr Varin and trade union representatives, is scheduled to see Peugeot chairman Thierry Peugeot on Thursday.