PSA Peugeot-Citroën, France's ailing carmaker, said Thursday that plummeting demand for its vehicles has prompted it to close a factory that employs 3,000 people.

The company, which will close its Aulnay plant near Paris by 2014, said European demand has tumbled 8 percent in the first six months of this year and 23 percent since 2007. Peugeot Citroën, which depends heavily on southern European demand for its smaller cars, said its production contracted by 18 percent so far this year.

The depth and persistence of the crisis impacting our business in Europe have now made this reorganisation project indispensable in order to align our production capacity with foreseeable market trends,' the company's CEO, Philippe Varin, said in a statement.