-Peugeot to convene works council meeting before the end of July
-Car maker says it needs to save more on costs, according to union official
-Future of factory at Aulnay, north of Paris, at stake, says union official
-Opel supervisory board agrees restructuing plan
(Adds detail on Opel/Vauxhall in 8th to 13th paragraphs)
By David Pearson
PARIS--PSA Peugeot Citroën (UG.FR) Thursday said it would hold a formal meeting with labor unions next month as pressure grows on the French auto maker to do more to cut costs and stabilize its finances amid the continuing slump in Europe's car market.
A union official said Chief Executive Philippe Varin told labor representatives at the company's Paris headquarters that the company will be convening a meeting of the company's works council "in the coming days" at which the future of Peugeot's factory at Aulnay, north of Paris, would be on the agenda as it looks at new ways to improve the efficiency of its French operations.
A Peugeot spokesman said the meeting would be held "well before the end of July" but declined to give any further details.
According to the union official, Mr. Varin had told staff that management wants to detail the company's problem of growing excess capacity at its production facilities in France as demand for new cars continues to fall in Europe. Mr. Varin said additional cost-saving efforts will be necessary, the union official said.
Peugeot already has a EUR1 billion ($1.24 billion) cost-reduction plan in motion as part of a wide-ranging strategy to stabilize its finances. The company, which raised €1 billion through a capital increase earlier this year, is in the process of selling €1.5 billion in assets. Peugeot has also struck a cost-saving alliance with General Motors Co. (GM) which is struggling to return its own European operations to profit.
Peugeot burned through EUR1.65 billion in 2011 as slowing demand for new cars and fierce competition in Europe's oversupplied auto market dented its performance. GM's operations in Europe lost $747 million in 2011.
But the continued contraction in European auto demand, with volume auto makers exposed to southern Europe bearing the brunt of the drop off in demand for new cars as the euro-zone sovereign debt crisis drags on, is intensifying pressure on Peugeot to address the lack of competitiveness of its French factories, some of which are working at below 50% capacity.
Increasing signs of strain in the industry coincided Thursday with the approval of a restructuring plan by the supervisory board of GM's Opel and Vauxhall brands but the company gave no new details of concrete measures or a time frame for turning around the unit.
Opel reiterated it plans to invest massively in its product portfolio, review its marketing strategy, reduce costs and draft a new plan to increase exports.
Earlier this month, Opel said it aims to close its plant in Bochum, Germany, after 2016, which would mark the first major plant closure in the country since World War II.
However, Opel's statement Thursday didn't mention how it plans to address the problem of over capacity.
"The plan [...] paves the way for a strong future of Opel," GM vice president and Opel supervisory board Chairman Stephen Girsky said. "GM stands behind Opel and supports management and labor representatives to work towards the goal of improving customer satisfaction and returning to profitability quickly," Mr. Girsky said.
Opel labor chief Wolfgang Schaefer-Klug described the plan as a "good basis" for Opel's future.
But Opel/Vauxhall and Peugeot are having to contend with the continuing slump in demand for new cars in Europe.
Peugeot's new car registrations, which mirror sales, fell 20% to 135,874 in May, worse than the 8.4% overall decline in the European market to 1.15 million vehicles, according to industry data. Opel/Vauxhall registrations fell 12% to 81,489 cars.
Latest industry forecasts have put the likely contraction in the European market at 7% to 8% this year.
Workers from Peugeot's assembly plant at Aulnay sous Bois, north of Paris, demonstrated outside the company's Paris headquarters Thursday amid increasing speculation that the factory, which employs some 3,000 workers, will be shut down after 2014.
"[Mr. Varin] told us that he understood the concern over the lack of information concerning the company's plans for Aulnay," the union official said. Mr. Varin reassured officials about the future of the company's other vehicle assembly plants at Rennes and at Sevel in the north of France but said Aulnay's future will be on the agenda at a coming works council meeting.
Last week, Mr. Varin met with France's Industry Minister Arnaud Montebourg as the government considers ways to support the French auto industry as the pressure grows to close under utilized French factories.
In the aftermath of the 2008 financial crisis, the French government extended multibillion-euro loans to Peugeot and French rival Renault SA. The loans were conditional on neither company closing French factories. The government shored up auto sales by offering subsidies for car owners to trade in old vehicles for new, more efficient models, something Renault has said should be considered again.
Write to David Pearson at david.pearson@dowjones.com
