July 25, 2012 / 6:44 AM / 5 years ago

Peugeot details losses to defend job cuts

PARIS (Reuters) - PSA Peugeot Citroen (PEUP.PA) vowed on Wednesday to press ahead with politically fraught restructuring plans as the troubled French automaker detailed mounting losses it has described as a threat to its future.

Europe’s second-largest car maker posted a 662 million-euro ($800 million) first-half auto-division loss that dragged its bottom line into the red - as it had warned earlier this month when announcing 8,000 French job cuts and a plant closure.

“The depth and persistence of the crisis impacting our business in Europe requires the launch of the reorganisation,” Chief Executive Philippe Varin said in a statement. “We have a clear understanding of how hard this project is for a large number of our employees.”

Presenting the results as executives sought to push through a 10 percent French workforce reduction in a fresh round of union talks, Peugeot said the cutbacks would save 1.5 billion euros by 2015.

The company said it burned through 954 million euros of operating cash in the first six months as sales fell 5.1 percent to 29.55 billion.

The net loss was 819 million euros, compared with a year-earlier profit of 806 million. Asset sales reduced net debt to 2.4 billion euros from 3.4 billion at the end of December.

The redundancies, combined with the closure of the Aulnay plant near Paris and 6,000 European job cuts announced last year, will generate 600 million euros in savings for 2015, Peugeot said on Wednesday.

The company also pledged to cut 550 million euros of investment and generate a further 350 million through cooperation with alliance partner General Motors (GM.N).

Unveiling the reorganisation on July 12, CEO Varin had said any further delay “would have put the group in great danger”.

But the Aulnay closure decision, a key part of the plan, had been leaked more than a year ago and denied by Varin - sparking government accusations after the announcement that he had lied to workers and the public.

    Unions were set to stage protests outside Peugeot headquarters on Wednesday as new Socialist President Francois Hollande’s government prepared to unveil a broader auto-industry support plan.

    Arnaud Montebourg, the recovery minister heading the initiative, is expected to recommend measures including stronger tax incentives on smaller vehicle categories - where Peugeot, Citroen and Renault (RENA.PA) still lead the domestic market.

    The latest savings goal follows 4.7 billion euros of earnings improvements announced by Varin since he joined Peugeot in 2009, London-based Credit Suisse analyst Erich Hauser said.

    “If you’re delivering on these and still losing money like there’s no tomorrow, it doesn’t really inspire a lot of confidence,” Hauser said. “The ball is in the French government’s court now.”

    ($1 = 0.8275 euros)

    Additional reporting by Gilles Guillaume; Editing by James Regan

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