PSA Peugeot Citroen SA plans to cut around 6,000 jobs across Europe in a bid to save euro800 million ($1.1 billion) after warning that its 2011 earnings would be hammered by the impact from Japan's natural disaster and soaring raw material prices.
The maker of the Peugeot 207 and Citroen C3 outlined its plan to cut costs next year at a meeting Wednesday with labor representatives. Half of the planned cuts are to be in purchasing and half in fixed costs, Peugeot Citroen said.
The job cuts are to be made next year, Peugeot Citroen said in a statement. The plan calls for around 1,000 manufacturing jobs to be cut, with the rest being divided roughly equally between outside contractors and Peugeot Citroen's own staff in non-production jobs in sales, marketing, research and development and IT.
Peugeot Citroen made the announcement as it reported lower quarterly sales in its core automobile division. It said its car division's sales slumped 1.6 percent to euro9.31 billion in the third quarter, from euro9.47 billion a year earlier.
The Paris-based car maker blamed the drop on the March earthquake, tsunami and nuclear disaster in Japan, which has choked off supplies, as well as higher pressure on selling prices as competition from rival car makers heats up in a flat European market.
Peugeot Citroen warned its core car making business could have an operating loss for the full year, saying it will be "close to break even." It estimated the negative impact on earnings from the Japan crisis at euro300 million, while rising prices for steel and other raw materials will have a negative impact of euro700 million.
Investors dumped the company's shares as trading opened in Paris, but by midday the stock had rebounded on hope that the cost cutting plan would restore profitability at France's largest car maker.
At 1000 GMT (6 a.m. EDT), the stock was up 1 percent at euro17.23.
Peugeot Citroen also said overall sales for the group, including its car parts division Faurecia and other subsidiaries, were euro13.5 billion in the third quarter, up 3.5 percent from euro13 billion a year earlier.