The ever-weakening European economy has claimed even more victims.
French automaker PSA Peugeot Citroen said it will slash 6,000 jobs in an effort to save 800 million euros ($1.1 billion) next year after the company’s automotive revenues dropped 1.6 percent in the third quarter.
Global sales of new vehicles dropped by 3 percent from the year-ago quarter – although sales to Latin America and China jumped by 7 percent.
The company blamed the revenue drop-off to a sharp contraction in European demand.
The job cuts will comprise 1,000 manufacturing positions, 2,500 contractors, with the remainder in sales, marketing, information technology and research and development, Peugeot said.
The company said the job cuts are necessary to restore the automotive division's competitiveness and profitability,” adding that its strategy of becoming more global and moving upmarket remains more valid than ever.”
On Wednesday, the company warned that its core auto business may not record a profit this year due to pricing pressures. Peugeot also said free cash flow for 2011 will likely be negative.
The competitive environment has become more challenging due to pricing pressure, which has intensified in Europe since September, and the unfavorable impact on the country mix of the fall-off in demand in southern Europe, Peugeot stated.
An analyst at Barclays Capital wrote in a research note: The company's efforts to move upmarket mean it needs to stand firm on price, but the increasing levels of competition in the European market mean the cost of such a strategy is increasing. It's hard not to think [Peugeot’s] position will become even more untenable as the competition seek and achieve greater scale.
Barclays added: Given the weakening European outlook, a French market that faces a tough hurdle in the remaining months of 2011 and the replacement of PSA's most important model - Peugeot 207 - in early 2012, we find it worrying that the company has made so little progress at reducing inventory.”
Adding to the gloom, Bernstein Research analyst Max Warburton wrote: The key question is whether this is a clear warning sign that the European consumer has gone on strike and all original equipment manufacturers are having to surrender pricing or whether there is something specific at PSA that means they are taking more pain than the others,