March 23, 2012 / 5:30 PM / 6 years ago

UPDATE 1-GM-Peugeot alliance seen driving plant cuts

* Peugeot briefs unions on alliance as GM prepares Opel plan

* Plant cuts were part of GM-Peugeot talks - source

* France “vigilant” over possible Aulnay closure move - official

By Laurence Frost and Christiaan Hetzner

PARIS/FRANKFURT, March 23 (Reuters) - Auto workers at Peugeot and at GM’s Opel unit are braced for a fight with management as a clearer picture emerges of the job cuts and plant closures likely to result from their alliance.

PSA Peugeot Citroen shed light on the “immediate social consequences” of the tie-up at an internal briefing on Friday, CGT union leader Bruno Lemerle said. “As we suspected, they’re mostly negative for jobs.”

Paris-based Peugeot and General Motors unions will meet in Brussels to coordinate opposition to the expected cuts, labour representatives at both companies said.

Europe’s auto industry is grappling with excess capacity and cut-throat price competition as overall demand sags under the weight of the debt crisis. All major car makers except Volkswagen lost money in the region last year.

GM, based in Detroit, is preparing an Opel business plan for presentation next week amid mounting signs that the alliance with Peugeot will help both partners close or shrink factories.

While both automakers have said some factories must close or downsize to stem losses, they have so far maintained that plant decisions are unaffected by their partnership in vehicle development and production.

However, an adviser who took part in the GM-Peugeot negotiations said factory closures were an inseparable part of the manufacturing talks but won’t be announced in France until after the May 6 presidential election.

“Both companies have a pretty clear idea of what they’d like to do,” said the adviser, who declined to be identified or give details. “The French are obviously not going to announce it now, before the election.”

Under the alliance plan, unveiled on Feb. 29, GM and Peugeot are targeting at least $2 billion in annual savings from shared purchasing, logistics and the joint development and production of vehicles and parts. GM, the world’s biggest automaker, is paying 304 million euros ($403 mln) for a 7 percent stake in Peugeot.

Some of the first cutbacks could be felt in research and development. Peugeot told unions on Friday that it may share automatic dual-clutch gearboxes with GM instead of developing its own for 2014.

Chief Executive Philippe Varin last month suspended plans to build the fuel-efficient transmissions in northern France. The 220 million euro project, announced four months ago, was to have safeguarded 400 jobs at the Valenciennes plant.

GM’s five-year plan for Opel, to be presented to its board next Wednesday, is likely to include more than one plant closure, according to people familiar with the company’s thinking.

GM plants in Bochum, Germany and Ellesmere Port, England, are most at risk. Opel’s European sales tumbled by a fifth in the first two months of this year - worse than the 18 percent decline at the Fiat and Peugeot brands, but better than Renault’s 28 percent plunge.


Other sites are likely to come under pressure as Peugeot and GM prepare to introduce their first joint vehicles from 2016.

Under the plan, subcompacts like GM’s Opel Corsa and the Citroen C3 will be based on Peugeot technology, while mid-sized cars such as the Opel Insignia, Citroen C5 and Peugeot 508 will draw on GM platforms.

Opel has already slowed Corsa assembly at plants in Zaragoza, Spain and Eisenach, Germany, where the work week has been shortened to 30 hours from 38.

Zaragoza, which employs 5,400 workers, has ordered temporary layoffs as production slumps to an expected 280,000 vehicles this year, below 70 percent of capacity, from 365,000 in 2011.

“We have to be more efficient and adjust our production to the situation in our markets,” said a spokeswoman for Opel in Spain, declining to comment on possible further cuts.

The shift to a joint small-car programme could also seal the fate of Peugeot sites in Madrid and Aulnay, near Paris, that were already under threat.

An internal company document leaked last June expressed doubts over the Madrid plant and outlined plans to announce Aulnay’s closure after the upcoming election.

While denying that any decision had been taken, CEO Varin acknowledges that Aulnay’s future is uncertain beyond 2014.

The plant may not last that long, according to a French government official, who said worsening conditions could yet force Peugeot to announce an earlier closure date after the election.

“We hope there won’t be any nasty surprises but we remain very vigilant,” he said.

Peugeot’s Madrid factory, which employs 2,700 workers, is swiftly losing business as its 207 small car is replaced by the 208, assembled in France and Slovakia.

An earlier decision to build a future compact car in Madrid remains suspended indefinitely, Peugeot said today - leaving the plant with dwindling volumes of two niche 207 variants, a station wagon and a coupé-cabriolet.

“With no new models coming, the plant is already in a downward spiral,” a CGT union spokesman said. “Madrid and Aulnay are clearly both in the firing line.”

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