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The PSA Peugeot Citroën plant in Aulnay has been seen as a candidate for closure since last year, when French media published an internal document showing the company was considering it.
Philippe Varin, chief executive, warned in an interview earlier this year that Peugeot needed to address its overcapacity problem, and said that France was saddled with higher labour costs than Germany.
Car plant closures have until now been a rarity in Europe because of political and union pressure on an industry seen as core in most countries.
Peugeot, like western Europe’s other carmakers, is burdened with the legacy of an industrial base centred largely in its shrinking home market at a time when all of its sales growth is coming from emerging markets on other continents.
French president François Hollande’s administration has already expressed concern about the effect of restructuring plans at PSA, which is one of the country’s largest employers and exporters and Europe’s second-largest carmaker by sales after Germany’s Volkswagen.
Until now Peugeot has dealt with its capacity overhang in France by trimming jobs and boosting efficiency at its plants – a process it calls compactage – rather than take the political heat of trying to close one.
However the sharp slowdown in car sales is now forcing it and other carmakers to confront the issue. General Motors said last month that its plant in Bochum, Germany would close by 2017, and Fiat and Ford Motor are also said to be considering shutting plants.
Peugeot said on Thursday that capacity utilisation at its European plants fell to an average of 76 per cent in the first half of this year, from 86 per cent a year previously.
In the car industry, plant utilisation rates of 75-80- per cent are seen as the minimum level needed for manufacturers to operate profitably.