PSA to build next Citroen C3 compact in Slovakia: sources

PARIS Thu May 22, 2014 12:31pm EDT

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PARIS (Reuters) - PSA Peugeot Citroen plans to build its next C3 compact model in Slovakia instead of France, sources close to the French carmaker told Reuters on Thursday.

The move is part of a strategy to switch production of mass-market small cars away from Western Europe where costs are considered too high and instead build higher-end models in the region.

"They're starting technical operations on the new Citroen model in the coming weeks... it's going to be in eastern Europe, in Trnava," one source close to the matter told Reuters.

Two other sources close to the car group confirmed that a decision had been made to produce the future C3 in Slovakia, where the company already builds the C3 Picasso multi-purpose vehicle and the Peugeot 208.

A PSA spokesman declined to confirm the production move and said the carmaker did not unveil such plans in advance. He said PSA had pledged to preserve its French factories as part of a labour deal signed last year.

PSA Chief Executive Carlos Tavares and his predecessor Philippe Varin have repeatedly said it is no longer viable to produce mass-market small cars in France because tough competition mean prices on such models are too low to cover the production costs.

Tavares is expected to face questions from unions on Friday during a visit to a factory in Poissy, near Paris, where the C3 is currently produced for the European market along with the premium DS3 model.

Other car manufacturers are shifting production of smaller vehicles to low-cost European countries.

GM's Opel Corsa and Volkswagen's Polo are already built in Spain, and according to press reports, Fiat plans to produce a new version of its Punto at its Tychy factory in southern Poland.

In March, Mercedes said it would add additional shifts to build the CLA A-Class and B-Class vehicles in Kecskemet, Hungary, although it said this was because its plant in Rastatt, Germany was already running at full capacity.

(Additional reporting by Ed Taylor; Writing by James Regan and Andrew Callus; Editing by Leila Abboud and Jane Merriman)

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