Auto workers get enforced break as Europe slows

Peugeot Citroen, Fiat, Renault, GM plants facing stoppages

PARIS/BERLIN (Reuters) — European auto workers returning from their summer break may not be back on the factory floor for long, as car makers order temporary shutdowns in response to a protracted sales slump.

Staff at some PSA Peugeot Citroen, Fiat, Renault and General Motors Opel plants face stoppages of up to three weeks — and their next leave will be no holiday. While state-funded programmes cover some of their lost pay in France, Italy and Germany, the shutdowns will add to longer-term uncertainty hanging over thousands of auto workers.

"People are quite worried," said Gerard Lolivier, a Renault worker and Force Ouvriere union official at a plant in Douai, northern France, which is closing for four days in September, then cutting production of the Scenic minivan by 25 per cent from October 1.

"We know we're going to suffer in the short term because the Scenic sales are not up to scratch," he said.

In Western Europe, the worst hit region, car deliveries are expected to fall by a further 800,000 vehicles this year to 13.6 million, according to consultancy AlixPartners. That is 19 per cent below their 16.8 million peak in 2007.

Compounding the pain, most incumbent mass automakers are losing ground in the shrinking market. They are seeing customers defect to overseas rivals such as South Korea's Hyundai and Kia.

A buoyant Volkswagen has also defied the 6.3 per cent market slump with a 0.8 per cent dip in the first seven months, helped by newer models and competitive pricing.

More bad news

European registrations will show a bigger overall decline for the full year, Frankfurt-based Metzler Bank analyst Juergen Pieper predicted.

"We're bracing for more bad news in the second half," he said. "With no rebound in sight and underlying economic sentiment still weak, it won't be until 2014 that things may noticeably improve."

Fiat workers preparing to return next week to the Pomigliano factory near Naples were told on Wednesday they would be stood down again within the month for a total of two weeks. Pomigliano makes the Panda mini, one of Fiat's newest models.

Chief executive Sergio Marchionne, who last year scrapped a plant in Termini Imerese, Sicily, has warned that another may close unless unions make concessions allowing vehicles to be exported profitably to the United States.

Fiat controls U.S. automaker Chrysler through a 62 per cent stake.

Some of the 5,600 workers who returned on Tuesday to Peugeot's plant in Rennes, western France, may also find themselves laid off for one week in September, as the struggling French automaker slows assembly of its mid-sized 508 and Citroen C5 cars.

Production of several other flagship models, including the upscale Citroen DS5, will halt for 10 days between September and early November, unions at Peugeot's historic Sochaux plant were told on Friday.

Vehicle stocks

"If vehicle stocks are building up because you're not selling enough, at some point you have to pull the plug," said London-based Credit Suisse analyst Erich Hauser.

Temporary shutdowns are a "cumbersome process" that create only limited cost savings but have a bigger effect on cash flow.

"Increasing stocks consumes cash, which everyone's keen to avoid because they're very focused on their balance sheets right now," Hauser said.

GM's Opel has also said it will halt production for 20 days at its main factory in Ruesselsheim, central Germany, and shutter a parts factory near the southwestern city of Kaiserslautern between September and the end of the year.

Ruesselsheim assembles the Insignia family car.

"We've decided to produce only what customers are ordering and the market can absorb," GM France chief Yves Pasquier-Desvignes said. "We don't want to build up stocks and tie up capital unnecessarily."

Ford, which last month doubled its full-year European loss forecast to $1 billion, will pause production of its Fiesta subcompact in Cologne for three days in September, affecting 4,000 workers.

The U.S. automaker's Genk plant in Belgium, already working a four-day week, will also halt for "a few additional days" this year, spokesman Adrian Schmitz said.

Volkswagen, on the other hand, is looking at ways to increase production as its Chinese exports soar and European sales continue to defy gravity.

Where rivals have extended their annual stoppages, VW did the opposite — cancelling the usual summer shutdown for 5,000 workers at its Wolfsburg plant to ramp up production of its updated Golf compact and meet strong demand for the Tiguan SUV.

"These are difficult times and I feel lucky to have a stable job," said VW employee Antonio Maldini, who worked through the summer at Wolfsburg. "How could I seriously grumble about a spoiled vacation?"

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