Peugeot offers employment pledge if unions agree on wages

Struggling French automaker PSA Peugeot Citroen offered Wednesday to maintain employment at its domestic plants if unions agreed to a wage freeze and more flexibility on hours. "In case an agreement is signed, PSA Peugeot Citroen will promise to maintain its activity in France" through 2016, the company said in a statement. The company suffered a 5.0-billion-euro ($6.7-billion) loss last year as car sales in Europe hover near 20-year lows, and the French government had to rescue its financing arm last year. Peugeot, the biggest French carmaker and Europe's second-biggest after Volkswagen, shocked France in the middle of last year when it announced plans to cut 11,000 jobs between 2012 and 2014 and to shut two French plants as it tries to reduce its overcapacity. It has also been holding talks with unions with the aim of reaching a deal to freeze wages in 2014 and limit rises thereafter, and introduce greater flexibility into working hours. PSA Peugeot Citroen said it plans to manufacture 930,000 vehicles in its French factories this year and that this should rise to around 1 million by 2016. This level of production is sufficient to pledge to not close any other of its assembly and equipment factories, said the automaker. PSA Peugeot Citroen chief executive Philippe Varin said earlier this month he expects the European car market will begin to recover next year. It said it foresees launching one new model in each assembly plant, which would in effect guarantee their operation longer than 2016. This would entail 1.5 billion euros in investment, which the company said was considerably higher than the level over the past three years. PSA Peugeot Citroen also said it would keep open all its research and development sites in France and 75 percent of the work in the country through 2016. PSA Peugeot Citroen's human resource chief, Philippe Dorge, said the company's 70,000 employees would share in the benefits after the company's fortunes turn around. The top union at company, the CGT, was sceptical of the company's offer, saying "keeping sites open doesn't mean keeping all production lines going." However the CFE-CGC union called management's pledge to keep factories open "good news". While the agreement would allow PSA Peugeot Citroen to maintain production in France, its alliance with US auto giant GM opens up further possibilities to move production abroad. Sources confirmed Wednesday that the company could produce the next version of its compact C3 Picasso, currently being assembled at a factory in Slovakia, at a plant in Spain belonging to GM's European unit Opel.