French car manufacturers PSA Peugeot Citroen has recently announced that they will be conducting studies on the assembly lines of their Mulhouse plant in eastern France and their Poissy plant on the outskirts of Paris. The results will be in by the end of the next quarter, after which they will decide whether or not to enforce shut-downs of lines not working at their optimal capacity.
The news of this review was released in a press statement by a spokesperson for the company. “We are launching an internal study in the next few weeks with a likely outcome in the first quarter of 2014,” they said.
This review is but one of the many steps that the company has had to take to fulfill the conditions of the government lifeline they were given in the middle of the year.
PSA Peugeot Citroen has had trouble in automotive sales since their financial partner Banque PSA Finance’s credit score was downgraded in the beginning of the year. Since then, they have experienced a huge decrease in car sales, losing the car market to competitors which offer lower car purchase rates, such as Volkswagen and Renault, along with lowered car exports.
Recognizing the paradoxical nature of the issue, the European Union offered the company staggered assistance worth a total of €7 billion in an effort to prevent the second largest carmaker in Europe from declaring bankruptcy.
Joaquin Almunia, the EU Competition Commissioner, stated that the assistance they provided to PSA was to reduce “the damaging effects for competitors who have not received support from public funding,” and involves an infusion of company bonds as well as more modest acquisitions in the future.
In accordance with the terms of the given aid, PSA Peugeot Citroen has been working constantly to tackle its debt and stabilize borrowing costs. Amongst the casualties was one of PSA’s oldest plants, opened in 1973 at Aulnay-sous-Bois, France. Despite protests by over a thousand workers in the plant, the company had to shut it down completely at the end of October of this year in an effort to cut costs.
PSA is another major company hit drastically by the European automotive sales recession, with a loss of over €5 billion last year. However, they still manage to bring in car sales worth a cool €100 million each month, and are not out of the running yet.
Although PSA is currently reviewing numerous developmental projects, such as a diesel-hybrid engine, as well as participating in multiple deals in foreign countries, such as their recent talks with China’s Dongfeng Motor Group and a lifting of the sanctions on Iran leading to increased automotive exports to the country, PSA still has to consider closing one or more of their assembly lines.
The Mulhouse plant has a forecast annual production of 190,000 to 230,000 vehicles; the Poissy plant, 240,000 to 270,000. As such, the latter is less likely to have one of its two assembly lines shut down.
