PSA and Dongfeng have reportedly agreed to halve their Chinese workforce to 4,000 employees, while also dropping two out of their four shared assembly plants.
According to Reuters, the two automotive groups are attempting to curb losses as the world’s largest car market is beginning to lose momentum. Both carmakers declined to comment on the details surrounding their restructuring plans.
“We are working with our partners to improve the overall performance of our business in China in all its dimensions,” said a PSA spokesman.
This new strategy may have been spurred on by a threat of withdrawal by PSA, as sources at the French carmaker said that their chief executive had “signaled that PSA might otherwise exit the 27-year-old partnership with its 12.2% shareholder Dongfeng, or leave China altogether”.
“We’re just a whisker away from having to withdraw from China,” said one person close to the PSA board. “It really is that serious.”
The Chinese car market dipped last year for the first time since the 1990s and is expected to go down another 5% in 2019. For PSA, their problems in China go back four years and include plunging sales and 400 million euros ($450 million) written off its DPCA stake (Dongfeng Peugeot Citroen Automobiles).
Their sales in China have dropped almost threefold last year, reaching 251,700 units from a peak of 731,000 units in 2014.
“We’re not giving up,” stated a PSA spokesman. “We are still pursuing our action plan to cut fixed costs.”
For now, the plan is to close the Wuhan 1 assembly plant, while selling the Wuhan 2 facility. Meanwhile, DPCA workforce will fall from 8,000 to 5,500 by the end of this year, and to 4,000 within another three years.
Other changes will include dropping underperforming nameplates as both Peugeot and Citroen lineups will be streamlined around more profitable models – mirroring the European turnaround strategy.