UPDATE 2-Peugeot van plant gets reprieve after union concessions

Fri Aug 31, 2012 11:36am EDT

* Decision will secure future of Sevelnord plant

* PSA says Toyota to fund part of investment

* PSA shares up 0.3 pct by 0723 GMT (Adds union comment, background)

PARIS, Aug 31 (Reuters) - PSA Peugeot Citroen announced plans to build a new range of commercial vans at Valenciennes-Hordain, granting a reprieve to the northern French plant after unions made concessions on pay and conditions.

Europe's second-biggest car maker said it will build replacements for the mid-size Peugeot Expert and Citroen Jumpy delivery vans at the plant, currently operated under the Sevelnord joint venture from which Fiat is withdrawing.

"The group's decision will ensure the future of the facility," Peugeot said in a statement. The automaker said it would invest more than 750 million euros ($937 million) in the new vehicle programmes.

Under plans announced with Toyota in July, Peugeot will also build a variant of its current and future van models for the Japanese automaker.

The investment was announced after unions agreed in July to a pay freeze, reduced leave and increased working-time flexibility.

"This is the culmination of months of work," said Pascal Lucas, an official with the CFE-CGC union.

"In view of the group's current financial difficulties, this is a good result for our factory."

Without the concessions, Paris-based Peugeot had warned that it would choose a Spanish plant to build the new vehicles after Fiat's withdrawal, leading to the Valenciennes plant's likely closure in 2016.

Peugeot is bearing the brunt of a long, deep sales slump that has squeezed automakers' earnings between a glut of production capacity and ultra-competitive discounting in the region.

The company is already cutting more than 10,000 domestic jobs as it closes its Aulnay plant near Paris and shrinks another in Rennes, western France.

A Peugeot spokesman said Toyota would fund part of the Valenciennes investment but had no further details.

Peugeot is Europe's biggest producer of light commercial vehicles, with a 20.8 percent share of the market in the first half of 2012.

The Valenciennes plant assembled 94,000 vans last year, of which 20,000 were for Fiat and the remainder for the Peugeot and Citroen brands. ($1=0.8001 euros) (Reporting by Dominique Vidalon, Gilles Guillaume and Laurence Frost; Editing by James Regan and Greg Mahlich)

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