PSA/Peugeot-Citroen SA plans to cut about 6,000 jobs in Europe as part of its effort to reduce costs by 800 million euros ($1.1 billion) next year to combat a tougher European market. Hit the jump to read the rest of the story.
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PSA said the reduction will include 1,000 manufacturing jobs and 2,500 contractor positions. The other 2,500 job cuts will mainly be in sales, marketing, information technology and research and development.
PSA also warned that its core carmaking business would barely make a profit and it expects 2011 free cash flow to be negative this year as it battles with downward pressure on prices in Europe.
Recurring operating income at its automotive division would be close to breakeven for the full year “in a more difficult European market environment,” compared with a previous target for “clearly positive” profit, the company said Wednesday.
“The competitive environment has become more challenging due to pricing pressure, which has intensified in Europe since September, and the unfavorable impact on the country mix of the falloff in demand in southern Europe,” PSA said.
Third-quarter sales slipped 1.6 percent to 9.31 billion euros at the automaking division, PSA said on Wednesday. Group sales rose 3.5 percent to 13.45 billion, helped by its majority stake in parts supplier Faurecia SA.
“We think the market was not aware of the extent of the group’s profitability problems,” CM-CIC Securities analyst Florent Couvreur said. “This bad news had not been completely priced in.”
German rivals Daimler and Volkswagen are expected to publish third-quarter results on Thursday, with analysts on average expecting a 10 percent rise in operating profit at Daimler AG and a 31.5 percent rise at Europe’s biggest carmaker, Volkswagen AG.
Daimler dismissed market talk last week that it would cut its outlook for the full year and stuck to its guidance.
