(Adds CEO comments, details, background)
By Andrew Callus and Laurence Frost
PARIS, March 3 (Reuters) - PSA Peugeot Citroen may seek more cost savings and does not rule out capacity cuts in France after 2016 if they are needed to turn the struggling carmaker around, new Chief Executive Carlos Tavares said on Monday.
Tavares also pledged to accelerate a 1.5 billion euro ($2.1 billion) savings drive already underway at the company.
The Paris-based carmaker, which is raising 3 billion euros in a rescue deal with Chinese partner Dongfeng and the French state, has promised not to close any French plants for two years under a pact with its workforce.
“We are going to respect very rigorously the agreement we have with our unions, which means no factory will be closed until 2016 at least. That’s the deal,” Tavares said in a press panel interview organised by French trade publication 7pm Auto.
Whether plant cuts are needed after that date “will depend on the results of the company”, Tavares added.
Peugeot is making good progress towards the existing savings goal announced in 2012 and could go further, Tavares also indicated.
“I am not the kind of guy to stop at the objective just because he has reached the objective,” he said.
The 55-year-old former Renault chief operating officer was hired to lead Peugeot out of a six-year European slump that left the company on life support in the form of a 7 billion euro state guarantee, and needing more.
The carmaker is preparing to sell 14 percent stakes to Dongfeng and the French state in a capital increase - diluting its founding Peugeot family to the same level - and has pledged to return to positive cash flow by 2016.
Tavares gave a first hint of his plans for Peugeot on Feb. 19, saying he saw “huge room for improvement” to its manufacturing and distribution businesses.
A distant European No. 2 to market leader Volkswagen , Peugeot saw its regional market share tumble from 12.7 percent in 2012 to 11.9 percent last year as it racked up another net loss of 2.32 billion euros.
“THINGS CAN BE DONE”
The French state’s arrival as a major shareholder will not prevent further restructuring further if necessary, Tavares said, adding that the government’s 15 percent Renault holding had not prevented that carmaker from adjusting capacity.
“It’s part of my job to explain to our shareholders where are the levers for sustainable profitable growth,” he said.
“Everything we have seen so far from the presence of the French state on our competitor’s board seems to indicate concretely that things can be done.”
Peugeot has already announced more than 10,000 job cuts over three years and halted production at its doomed Aulnay plant near Paris in 2013.
The company also recently confirmed plans to cut its Poissy and Mulhouse factories down to one production line each from two, as first reported by Reuters in September.
But the French government has vowed to hold the carmaker to its earlier pledges to increase domestic production and is likely to resist any more plant cuts.
Further closures “are not on the agenda”, Industry Minister Arnaud Montebourg told France Inter radio on Feb. 18. “The restructuring has already happened, and it was painful enough”.
Peugeot still makes about a third of its cars in France, compared with less than 20 percent for Renault. Assembly line wage costs average 35 euros an hour in France, just over 20 euros in Spain and about half of that in eastern Europe.
Under their framework deal, Peugeot and Dongfeng have agreed to expand an existing joint venture with new models and Asian export markets, aiming to triple sales to 1.5 million vehicles by 2020. ($1 = 0.7240 euros) (Additional reporting by Gilles Guillaume; editing by Brian Love and Tom Pfeiffer)