Peugeot to shed 10,000 jobs and cut capital expenditure budget

The French car maker Peugeot said last night it would shed 10,000 jobs over the next year in a drive to cut costs and raise the profitability of the company.

Europe's second biggest automotive group also announced plans to reduce capital expenditure by €500m (£330m) a year, scrap a second production unit at its Trnava site in Slovakia, where the 207 model is built, and cut research and development costs by 15 per cent.

Peugeot said the job reductions would take place in France and Spain and would be achieved by a freeze on hiring when employees left the company, which employs a total of 130,000 in Europe and 208,000 worldwide.

The company said it expected the move to produce savings of €125m in the second half of this year. Peugeot is already closing its Ryton plant in Coventry, which will deliver savings of €91m a year.

The latest cost reductions are in addition to an existing efficiency drive designed to cut costs by €600m.

Jean-Martin Folz, Peugeot's chief executive, said the group had decided to act because of its declining market share in Europe, ageing model line-up, slow start-up for new models such as the 207 and increased competition.

The decision not to build a second plant at Trnava will save €200m. In addition, Peugeot is looking to increase the efficiency of its Poissy and Aulnay plants.

The aim is to boost capacity utilisation back above 100 per cent across Europe next year.

Peugeot has been forced into three profits warnings in the past year - the latest of which in July followed a €250m rise in the company's raw materials bill.

Mr Folz announced earlier this month that he is to retire at the end of the year.