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Peugeot to seek wage deal as slump threatens goals

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(Globalpost/GlobalPost)

By Laurence Frost

PARIS (Reuters) - PSA Peugeot Citroen <PEUP.PA> will seek cost-saving concessions from French unions to help meet turnaround targets, the company said on Wednesday after posting a further 6.5 percent sales slump in the first quarter.

The struggling carmaker, which is already scrapping 8,000 domestic jobs and closing a major assembly plant, will begin talks with unions in coming weeks, Chief Financial Officer Jean-Baptiste de Chatillon told reporters.

"We will need to launch negotiations on the competitiveness of the group," Chatillon said. The labour talks follow rival Renault's <RENA.PA> deal with unions on a pay freeze and working-time cuts and may address similar measures, though further job or plant cuts "are not the subject of these discussions", the CFO said.

Shares in Peugeot - which had plummeted last week to a four-month low of 5.17 euros - jumped 9.2 percent to 5.95 euros by 0728 GMT, helped by the company reiterating its full-year goal of halving last year's 3 billion euro (2.5 billion pounds) cash burn.

"Despite weakening end markets, PSA is sticking to the only tangible financial guidance it has set for 2013", Credit Suisse analysts said.

Among major carmakers, Paris-based Peugeot has been the worst hit by a protracted European auto sales slump that has been particularly deep in its core southern markets.

The company said revenue fell to 13.03 billion euros in the first three months of 2013, when its share of the shrinking regional market dropped to 12.3 percent from 12.9 percent.

Under a restructuring plan announced last July, Peugeot is pursuing a return to break-even late in 2014 and a profit the following year.

RECOVERY PLAN

The company last year received a state loan guarantee worth 7 billion euros, as well as 1 billion from a share issue and a further 2 billion from the sale of assets including its headquarters and Gefco logistics division.

Unveiling its biggest-ever full-year loss of 5 billion euros in February, Peugeot had insisted its recovery plan would be enough to turn its business around without further bailouts or disposals other than real estate.

The Aulnay plant near Paris, earmarked for closure in 2014, could be shuttered this year ahead of schedule and production transferred to nearby Poissy if protesters continue to disrupt output, Peugeot said on Wednesday.

The company also said additional measures may be required if a European market rebound fails to materialise next year.

"Operational initiatives to offset such potential deterioration are under review," Peugeot said.

The share rally - amplified by short-covering to cover earlier bets on a price decline - came amid growing doubts about Peugeot's turnaround strategy, as well as its 2013 cash-flow goal.

"We ... remain sceptical about PSA achieving this," Citi analyst Harald Hendrikse said in a note. Quarterly sales were nonetheless "somewhat ahead of expectations", he added.

Credit agency Moody's earlier this month lowered Peugeot's rating to B1, four levels below investment grade, and cut the carmaker's finance arm to "junk" status, citing concerns it may need more drastic cuts to survive.

Peugeot's recovery plan is based on assumptions including its ability to claim 13 percent of a stable European auto market.

The market-share goal is "under strong pressure", de Chatillon conceded on Wednesday.

(Additional reporting by Gilles Guillaume; Editing by James Regan and David Holmes)

http://www.globalpost.com/dispatch/news/thomson-reuters/130424/peugeot-seek-wage-deal-slump-threatens-goals-0