PSA Peugeot-Citroën is putting pressure on workers at its Sevelnord site in Valenciennes (France) to look at ways to cut costs or face up to the possibility of closure.
IHS Global Insight Perspective | |
Significance | PSA Peugeot-Citroën is putting pressure on workers at its Sevelnord site in Valenciennes (France) to look at ways to cut costs or face up to the possibility of closure. |
Implications | Unions fear that this could result in similar tactics at the automakers other plants in the country. |
Outlook | While the unions may find such an improvement in flexibility unappealing, without concessions PSA will look again to alternatives as the costs at its domestic sites become unjustifiable. |
PSA Peugeot-Citroën has told the workforce at its Sevelnord site in Valenciennes (France) that the plant must cut costs or face the possibility of closure, reports Reuters. Ludovic Bouvier at the CGT union and Pascal Lucas from the CGC union told the new service that the conditions that PSA is looking to impose include freezing salaries for at least three years, a reduction in the amount of leave and imposing more flexible working hours. As well as this, several hundred jobs would need to be cut, although the staff could be rehired to build any new vehicles then produced at the site. They added that the plan was first outlined to them on 25 May and that discussions will begin formally on Friday (1 June). The unions were warned at the same time that if they did not agree to concessions, the next generation of the Peugeot Expert and Citroën Jumpy light commercial vehicle (LCV) will be produced at PSA'S Vigo (Spain) facility. Bouvier stated: "This amounts to industrial blackmail… They want us to set an example that workers in the rest of the group's factories will eventually have to follow".
A spokesperson for PSA, Pierre-Olivier Salmon, said in response that even with concessions and if the automaker did find a replacement to Fiat, which is planning to leave their joint venture (JV), "we would still need to ensure that Sevelnord is competitive by comparison to alternative sites".
PSA will expand the eligibility criteria for voluntary redundancy and retraining of staff in France as part of its 2012 cost-cutting initiative. Sources said that the move follows the company having received only 623 applications out of the 1,900 candidates that it hoped for. This will now also focus on areas where staffing is deemed sufficient rather than just those considered overstaffed. However, PSA has denied reports that it plans to increase the target for voluntary redundancy from the current 1,900.
Outlook and Implications
Having seen tremendous losses stemming from its automotive division during the second half of 2011, PSA has been looking at ways of reducing its costs in Europe, and predominantly France, the epicentre of the majority of its operations. Although shedding personnel through natural attrition, ending temporary contracts and repurposing staff are being undertaken in some instances, the news about Sevelnord looks set to tackle the heart of some of the core issues facing the company. The conditions that the company looks eager to put in place would see greater production flexibility at the site where PSA is facing the prospect of the withdrawal of its current partner Fiat by 2017. Although other firms have been approached to join it or to be supplied by vehicles, any partner will undoubtedly want to ensure that costs are competitive. These concessions may allow PSA to also run the plant by itself at lower volumes than at present, should it deem it feasible. Unions in other countries have already agreed to similar measures to secure the future of vehicle production, particularly in the face of lower-cost rival sites. Indeed, Fiat's previously troubled Pomigliano d'Arco (Italy) site won the Panda model from the highly efficient Tychy site in Poland and will be rolled out to other sites (see Italy: 14 December 2011: Fiat Signs "Historic" Labour Agreement with Italian Unions), while more recently, a complicated deal has been agreed at General Motors' (GM's) Ellesmere Port (United Kingdom) plant to produce the next generation Astra (see United Kingdom: 17 May 2012: GM Europe Saves Ellesmere Port Plant). However, it is unlikely that the French unions will find this sort of move appealing given their previous stance on such measures, and the new socialist political climate may give them added impetus to fight. Without allowing PSA to reduce its costs though, the unions face the prospect of it cutting back on any further investment in France as the costs of production there become unjustifiable. Certainly Vigo across the border in Spain appears already under consideration and is proving cost-effective enough for PSA to produce a new model for high growth markets there (see World: 25 May 2012: PSA Reveals New Peugeot Sedan for Growth Markets). With this in mind, the unions really need to consider the long-term interests of those they represent.