Hollande faces key test on ailing Peugeot plant

Wednesday, 20 June 2012 15:56

Posted by Muhammad Iqbal

559

PARIS: French President Francois Hollande faces a key test of his pledge to stop domestic jobs haemorrhaging amid fears that an emblematic car plant near Paris could close and lead to thousands of layoffs.

Frantic talks are on between the management and state officials on the PSA Peugeot-Citroen factory in the northern Paris suburb of Aulnay-sous-Bois, which employs some 3,300 people, to avert such a possibility.

France was one of the earliest pioneers in automobile production and the sector, according to some estimates, accounts for 10 percent of the workforce.

Auto giants PSA Peugeot-Citroen and Renault have been complaining that production costs are too high to be competitive.

"The management has indicated very clearly and perhaps for the first time that it has no solution... for French factories, especially the one in Aulnay," said local mayor Gerard Segura from Hollande's Socialist party.

"We have a deep fear that the group will announce the possible shutdown of the Aulnay plant when it unveils its results at the end of July," he said, warning that it could lead to about 10,000 job losses in the auto and car parts sectors.

Peugeot, France's biggest carmaker, lags behind Volkswagen in Europe. It needs to slim or close underused French plants in the face of a moribund economy and falling sales in key markets like Italy and Spain, according to some analysts.

The issue is a delicate one for Hollande who has positioned himself as an advocate of growth rather than austerity as the way out of Europe's economic crisis.

Hollande has proposed a 120 billion euro "growth pact" ahead of key talks with eurozone leaders on June 28-29 in Brussels. It includes proposals for a financial transaction tax and investment to boost job creation, especially for young people.

France's Minister for Industrial Renewal Arnaud Montebourg held talks with PSA chief Philippe Varin on Tuesday but no details of the meeting have emerged.

Socialist lawmaker Claude Bartolone from the Seine-Saint-Denis department, where Aulnay-sous-Bois is located, said he hoped a closure could be avoided.

"Luckily Arnaud Montebourg told us that he had a mandate from the president of the Republic himself to meet the Peugeot management and to clarify the situation on jobs and industrial policy," he said.

The influential French CGT trade union had in June last year unveiled an internal Peugeot document that spoke of shutting the Aulnay plant in 2014.

But managing director Frederic Banzet said "the question concerned the future after 2014." The Aulnay factory was set up in 1973 after iconic Peugeot units within Paris were moved to the suburbs.

"PSA has been wanting to close Aulnay for a long time", said Bertrand Rakoto, an anlyst at Polk, which conducts specialised studies on the car industry.

"There have not been enough investments there," unlike in other plants, he said, adding that the auto giant "needs to reduce exposure."

Sales of new cars fell 17.2 percent in France in the first five months of this year. The government said in mid-June that it was weighing measures to help the sector following a demand from Renault.

A media report on Wednesday said Citroen's number two Philippe Varin faced the axe for non-performance.

The auto giant "is not satisfied with the functioning and results of Philippe Varin," LaTribune daily said on its online edition, adding that the problem was that no successor had been found.