Carmaking will end at the Aulnay plant near Paris in 2014, with some of this
production being consolidated into the nearby Poissy facility. Work at the
Rennes plant will also be cut back, as will corporate jobs across the French
operations.
Estimated net job losses are 6,500. Painful though this overhaul may be, it
represents a necessary – although at industry-level not sufficient – step.
Peugeot’s own European capacity utilisation in the first half of 2012
averaged 76 per cent; industry-wide, two-fifths of plants in Europe may be
running at less than 80 per cent capacity.
For Peugeot’s investors, however, yesterday’s announcement resolves little.
Faced with an 8 per cent slump in European demand in the first half of 2012,
the company expects a €700m operating loss in its auto division in the first
six months, as well as a group net deficit.
This is slightly bleaker than the market had anticipated. And if red ink
continues to flow in the auto business in the second half, albeit at a
reduced rate as cost-cutting kicks in, Peugeot may battle to break even in
2012 overall. Credit Suisse, for one, suggests a net loss at group level.
A bigger worry, though, may be liquidity. The company says cash burn is
running at €200m a month – similar to the latter half of 2011 – and that it
will be the end of 2014 before operating cash flow returns to break-even.
Short term, this should be more than covered by disposals – including the
corporate HQ – and the €1bn rights issue funds. But managing the situation
for the next two years will be a challenge, and the industry may fret about
any knock-on effect on product pricing discipline. Peugeot shares dipped. It
is far from clear the worst is over.
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