Peugeot to close Ryton with 2,300 job losses

The UK motor industry was dealt another devastating blow yesterday after the French car maker Peugeot announced that its Ryton plant in Coventry is to close with the loss of 2,300 jobs, angering ministers and union leaders alike.

Peugeot's unions immediately vowed to fight the closure and, in a thinly veiled attack, the Secretary of State for Trade and Industry Alan Johnson said he was "extremely disappointed" at the decision, which came despite substantial quality and productivity improvements at Ryton and the offer of government financial aid for production of future models.

The French company said Ryton would go from two shifts to one shift in July and then cease production of the 206 model altogether in the middle of next year, in what represents a further crippling setback for the West Midlands car industry. The closure of the plant after 60 years of car production follows hard on the heels of the shutdown of the nearby Jaguar factory in Coventry and the collapse a year ago of MG Rover with 6,000 job losses at Longbridge in Birmingham.

The future of Ryton has been hanging by a thread since 2004 after it failed to be selected as a production site for the 206's successor, the 207. Peugeot said Ryton's high production costs, coupled with a slowdown in the European car market, left it with no option but to close the plant.

But unions claimed the company would never have dared to treat French workers in the same way and attacked the lack of consultation, describing the announcement as a "fait accompli". Mass meetings will be held today at Ryton to gauge the strength of feeling among the workforce and the appetite for industrial action over the planned closure.

Last night Jean Martin Folz, the chief executive of PSA Peugeot Citroen, stressed there was no question of the decision being reversed and defended the company's failure to consult the UK Government and trade unions before the announcement. "There was nothing to negotiate and nothing to discuss, it was an economic necessity," he said, adding that any industrial action might only hasten Ryton's closure.

In addition to the 2,300 direct job losses, thousands more jobs in supply companies will be threatened when Ryton closes and 206 production is limited to Peugeot's Poissy and Mulhouse plants in France.

M. Folz said Ryton's high production and logistical costs made it the most expensive of all the company's plants, meaning that the group was unable to justify the investment needed to produce future models.

A Peugeot spokeswoman said the cost of building a 206 at Ryton was €415 (£287) greater than at Poissy because of higher wages, energy costs and the need to import most of the components from the Continent. Only 25 per cent of the parts used in the cars built at Ryton are sourced from UK suppliers.

She added that it would cost €255m to bring Ryton up to the standards of Peugeot's modern plants on the Continent and even then it would still be a much more expensive production site.

Mr Johnson said the DTI had done everything possible to encourage Peugeot to keep Ryton open, including an offer two years ago of a £14.4m grant to enable it to produce an extra model. He said the Government would look to the company to help it in finding new jobs for affected workers.

But Alan Duncan, the Conservative trade and industry spokesman, said the Chancellor should share some of the blame for the closure for presiding over a decline in the UK's competitiveness. "These job losses are an indication that all is not well with the economy," Mr Duncan said.

Tony Woodley, the general secretary of the Transport and General Workers' Union, described the news as "another nail in the coffin of the UK car industry" and pledged to explore ways with ministers and the company of reversing "this devastating decision".

Derek Simpson, the general secretary of the engineering union Amicus, said: "It is inconceivable that French workers at Peugeot would be laid off on this magnitude. Weak UK labour laws are allowing skilled British workers to be sacrificed on the altar of a flexible labour market."

Only last year, a senior Peugeot executive indicated Ryton was safe until 2010. Peugeot said the European market had weakened more quickly than expected and projected 206 sales for next year were a third lower than forecast.

Losing the battle for survival

* Ryton dates back to 1939 when a factory was built on the site to make aero engines for the war effort.

* Car manufacturing began in 1946 with production by the Rootes Group of the Sunbeam-Talbot Ten and 21.

* Chrysler took over Ryton in 1964 when Rootes ran into trouble and then sold out itself to Peugeot in 1978.

* At the height of production in the mid-1960s, employment reached 30,000 but by 1985 that had shrunk to 3,000.

* Production peaked at 209,607 in 2003 but fell to 130,000 in 2005 as shifts were cut from four to two.

* Peugeot has invested £450m in Ryton in the past 20 years and produced some 2.5 million cars at the plant.