France to aid clean cars as PSA Peugeot-Citroën announces big losses

PSA Peugeot-Citroën reported a net loss of 819 million euros in the first half of 2012 ahead of Wednesday afternoon’s announcement of a government plan of aid to the auto industry. The troubled French carmaker is to cut 1.5 billion euros in costs between now and 2015.

Reuters/Eric Gaillard

The loss reverses an 806-millon-euro profit a year ago.

Peugeot, which is France’s biggest carmaker and Europe’s second-largest, had already said it would be reporting a loss but the amount is higher than the estimate of about 209 million euros, compiled by Dow Jones Newswires talking to analysts.

The cost-cutting plan will include the 8,000 job losses the company has already announced in France, giving rise to the government’s car industry support plan.

Details of the first-half losses include:

• Revenues down 5.1 per cent to 29.6 billion euros:
• Operating income at breakeven, down from 1.16 billion euros in the first half of 2011;
• Auto division losses of 662 million euros.

The cost-cutting plan, named “Rebound 2015”, aims to save 600 million euros in the company’s French operation, 200 million euros from capital expenditure reductions and 350 million euros from a tie-up with the US’s General Motors, which was announced earlier this year.

Peugeot's sales in Europe fell 15.2 per cent in the first half but were up 7.5 per cent in China and 14.7 per cent in Russia.

The company expects the market to contract by a further eight per cent in Europe but to grow by nine per cent in Russia, seven per cent in China and two per cent in Latin America.

"The group is pursuing its strategy of brand upscaling with the successful launches of four hybrid vehicles, the Peugeot 208 and the roll-out of the DS range in China, Russia and Latin America," it said.

Peugeot workers, many from the Aulnay-sous-Bois plant which is due to close and the Rennes plant where 1,400 jobs are due to be axed, demonstrated outside its Paris headquarters on Wednesday morning as the works committee met to hear details of the restructuring plan.

Leaked details of the government’s car industry recovery plan revealed a strategy to try and carve out a niche in the market for eco-friendly vehicles and a turn towards protectionism:

• Subsidies to consumers buying electric vehicles will be boosted, to between 5,000 and 7,000 euros, and to between 2,000 and 4,000 euros for hybrids;
• Twenty-five per cent of vehicles bought by the state will be electric or hybrid;
• The government will call on the European Union to place a free-trade agreement with South Korea under surveillance to “defend the interests of the French automobile industry”;
• Financing facilities will be offered to manufacturers and suppliers suffering a major drop in European sales.

Anthony Terrade/RFI