France

Peugeot predicts recovery after announcing record losses

Reuters/Benoit Tessier

PSA Peugeot Citroën, has announced a record loss of 5.0 billion euros. But France’s largest carmaker claims it is on the brink of bouncing back, thanks to restructuring plans that mean shedding 11,000 jobs.

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"The Group's 2012 results reflect the deteriorated environment in the automotive sector in Europe," Peugeot head Philippe Varin said in a statement.

But he claimed: "The foundations for our rebound have been laid."

We have 17 products to be launched in the world, like higher quality and more attractive Peugeot lines, like the 208 and the new 308. The DS line from Citroen is French luxury, with the DS3. And the C line, from Citroen, which is simpler [...] we also will take advantage of our partnership with General Motors.

PSA Peugeot Citroën boss, Philippe Varin

Markets seemed to believe – they were expecting a loss,

Dossier: Eurozone in crisis

even if not such a big one – and Peugeot’s shares rose 2.5 per cent on Wednesday morning.

The company blamed the results on a previously announced asset writedown of 4.7 billion euros last year and on the crisis in the European car market.

The company's auto division has been losing money at a rapid rate, as much as 200 million euros a month in the middle of last year, and ended the year with a negative cash flow of 3.0 billion euros.

In announcing the writedown on assets last week, the company said it would reduce that negative cash flow by half over 2013 with a return to balance by 2014.

Of the 5.0 billion euros, 4.7 billion are asset depreciation. Peugeot has not actually lost 4.7 billion euros. You must also add over 500 million euros of profits put aside to fund layoffs and plant closures. This announcement is meant to shock public opinion and to shock employees into accepting the competitiveness agreements.

Jean-Pierre Mercier, union representative at PSA's Aulnay-sous-Bois factory

The government’s support package for Peugeot's financing arm, involving a six-month 1.2-billion-euro guarantee, was authorised by the European Commission on Monday.

Varin on Wednesday said that further state was “not the subject today”, claiming that the restructuring plan would lead to the company’s recovery.

Finance Minster Pierre Moscovici ruled out nationalisation, a solution that has been raised by some trade unionists and left-wingers.

The company is to fire 11,000 workers, close two plants – one near Paris and the other in Brittany – and push for growth in emerging markets, such as China, Russia and Brazil.

The company also intends to rationalise its range of products so that its Peugeot and Citroën brands are not competing for the same market.

Job losses at Peugeot have been the most publicised among tens of thousands of redundancies declared in French industry over the last couple of years.

Handling the unemployment crisis has been a major challenge for President François Hollande's Socialist-led government.

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