PSA Group and partner Dongfeng Motor have agreed to cut thousands of jobs in China and drop two of their four shared assembly plants, according to a document seen by Reuters, in a last-ditch bid to curb mounting losses as the world’s largest auto market loses steam.
Dongfeng Peugeot Citroen Automobiles (DPCA), the carmakers’ joint venture based in Wuhan, central China, will halve its workforce to 4,000 as it closes one plant and sells another under plans agreed last month between PSA CEO Carlos Tavares and Dongfeng Chairman Zhu Yanfeng, the document showed.
The agreement may avert a threatened withdrawal by PSA, according to two sources at the French carmaker who said their CEO had signaled that PSA might otherwise exit the 27-year-old partnership with its 12.2 percent shareholder, Dongfeng, or even leave China altogether.
PSA is attempting a reboot in adverse conditions. Once an auto industry cash cow, the Chinese market contracted last year for the first time since the 1990s and is expected to decline another 5 percent in 2019, squeezed by a worsening U.S.-China trade war.
DPCA will now close its original assembly plant, Wuhan 1, and redevelop the site in a commercial partnership with the local government, according to the plans. The factory’s tooling and production will be transferred to the Wuhan 3 facility.
Headcount across DPCA will fall to 5,000 from 8,000 by the end of 2019 and to 4,000 within another three years, as it also sells off its idling Wuhan 2 facility, according to the document — which noted ongoing discussions with unidentified potential buyers.
Underperforming vehicles will be dropped as the Peugeot and Citroen lineups are streamlined around more profitable models, mirroring the European turnaround strategy now powering record margins in PSA’s home markets.
