PSA To Cut Labor Costs By Moving More Production Out Of France

by Derek Kreindler

May 23rd, 2014 6:00 AM

psa to cut labor costs by moving more production out of france

PSA will consolidate their small car production at a factory in Slovakia, as the struggling auto maker looks to cut labor costs and increase margins on small cars.

Reuters and Automotive News Europe report that the next-generation Citroen C3, the brand’s best-selling model, will be built in Slovakia, alongside the C3 Picasso minivan and the Peugeot 208.

Although the 208 and C3 are currently built at PSA’s Poissy plant as well as in Slovakia, moving them eastward would allow PSA to slash their hourly wage costs, from 57 euros an hour in France, down to 15.50 euros in Slovakia. Lowering labor costs is critical for PSA, as it struggles to regain profitability and reap greater margins on their small cars, which are both unprofitable and PSA’s most popular cars.

Closing any French plant will be fraught with difficulty. Complex labor laws and cultural factors will make closing a plant a political nightmare for PSA – but the economics of Europe’s car market can no longer sustain it.

#Citroen #France #Peugeot #Production #PSA #Slovakia

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8 comments

Old Man Pants on May 23, 2014

Thanks for the link to your earlier article on this topic. Very interesting stuff, the direct interface between France and its North African labor pool. What puzzles me is how Slovakia offers any benefits over the factories already established in North Africa. Has the race to the bottom suddenly veered north?

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- Romismak on May 23, 2014
  
  You are mistaken probably this with Renault. PSA has no plant in N. Africa, Renault has in Tangiers and is buidling another one in MOR i think and also considered in Algeria. I am from Slovakia and read about this yesterday in slovak press, it´s simple PSA has new boss - Tavares and he wants to make them again profitable, so it makes no sense to produce lower-margin vehicles - cheaper cars in expensive France, when they have new modern factory in Slovakia and there is still capacity, lasst year they produced in Trnava - Slovakia plant above 250 thousand cars which was record and capacity is 300thousand - with additional shifts and eveything you can push it to 330-350 thousand i think so it´s lgoical step from Tavares. In European union PSA has no ,,cheaper,, plants - they have plants in Spain, Portugal and CZE - which is JV with Toyota for minicars and Slovakia plant is modern and labour is cheaper
  
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- Old Man Pants on May 23, 2014
  
  @romismak Thanks for the explanation, romismak.
  
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- Asdf on May 23, 2014
  
  Selling cars made in North Africa, in Europe, would be brand suicide.
  
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- 28-Cars-Later on May 23, 2014
  
  @Asdf They said the same thing about selling Mexican built cars in the US thirty years ago.
  
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Scwmcan on May 23, 2014

Wow 57 euros per hour, no wonder they are not making profits, and people complain about the North amaerican auto worker's wages.

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- Asapuntz on May 23, 2014
  
  "wage costs" is a confusing term, as the original article refers to "average labour cost", which almost certainly includes https://en.wikipedia.org/wiki/Non-wage_labour_costs it's not clear to me that the Slovakia number includes those costs.
  
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- Asapuntz on May 23, 2014
  
  @asapuntz Although the 3x factor seems to be in-line with https://en.wikipedia.org/wiki/List_of_European_countries_by_average_wage I don't know if non-wage labor costs scale linearly with salary.
  
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