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PSA-Dongfeng Venture to Close 2 Plants in China

PSA Group and Dongfeng Motor Group plan to close two of their four joint-venture assembly plants in China and dismiss half the venture’s employees.
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PSA Group and Dongfeng Motor Group plan to close two of their four joint-venture assembly plants in China and dismiss half the venture’s employees.

Reuters reports that Dongfeng Peugeot Citroen Automobile agreed late last month to idle one factory and sell another—both in Wuhan—and eliminate 4,000 jobs over three years, according to a document cited by the news service. PSA’s sales in China have sagged from a peak of 734,000 units in 2014 to 251,700 vehicles in 2018.

China’s passenger car market shrank 6% last year. Analysts expect sales to fall by nearly that much in 2019. The market has been hurt by the U.S.-China trade war and the likelihood of higher pricing caused by tighter emission control rules.

PSA’s plant cutback is an attempt to avert a complete exit from Chinese market. “We’re just a whisker away from having to withdraw,” one company source tells Reuters. “It really is that serious.” But PSA insists it is not giving up on China.

Last year analysts were describing 2018 as a make-or-break year for PSA’ China operations. The company’s sales efforts have been hobbled by outdated cars that lack China-specific features and a skimpy offering of high-demand SUV/crossover models. PSA said previously that it expects to debut 20 new or updated models in China by 2021.

In February 2018, PSA installed Carlos Gomes, former head of Latin American operations, as its third CEO in the region within two years.

Last week Bloomberg News reported that Dongfeng was considering the sale of some or all of the 14% stake in PSA acquired by the Chinese carmaker in 2014.

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