UPDATE 1-Peugeot to work on efficiency gains at French factories

Thu Jan 17, 2013 2:44pm EST

By Gilles Guillaume

PARIS Jan 17 (Reuters) - PSA Peugeot Citroen plans to negotiate an accord with unions in the next few months to permit more flexible work conditions at its French factories as part of the effort to turn around the money-losing car maker.

"We will be working on a flexibility accord in the coming months that will be a key element of improving the competitiveness of the group," Denis Martin, the industrial director of Peugeot, said on Thursday at a press briefing on the group's ongoing lay-off plan.

Such flexibility plans are intended to give car makers more leeway to shift workers between plants and modify their work hours so as to cope with fluctuations in demand for cars. Rival French car maker Renault has also been negotiating such a deal with its unions to bring its French factories' efficiency in line with its Spanish facilities.

The effort comes after Peugeot posted a 16.5 percent drop in car sales in 2012, making it the worst performer in a European auto sector that is struggling with weak demand after several years of economic downturn and debt crises.

Paris-based Peugeot is shedding assets, cutting 10,000 jobs and closing production capacity to stem mounting losses. Chief Executive Philippe Varin has warned that it will not return to profit before 2015.

Peugeot's attempt to improve the efficiency of its French factories is separate from the lay-off plan it is undertaking, which will lead to 8,000 job cuts in France. Martin said on Thursday that Peugeot expects to reach an agreement with its unions to finalize the restructuring by mid-February.

Peugeot has already started trying to improve its French factories' efficiency, which is key to its future given that it employs far more people in France than Renault.

At its Sevelnord factory in northern France near Lille, Denis Martin said unions in July had accepted a salary freeze and more flexible working hours in exchange for being accorded the manufacturing of a new model of car.

For his part, Martin dismissed the comparison between the flexibility accord that Peugeot would seek with the plans of rival Renault.

"I do not compare myself at all with Renault. We have very large factories in France, with 76,000 workers in our automobile business out of the 91,000 for the group. We are not at all on the same scale as Renault."

Renault has 54,000 employees in France.