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Two China Factories And 50% Workforce To Be Dropped By PSA, Dongfeng: Reuters

Two China Factories And 50% Workforce To Be Dropped By PSA, Dongfeng: Reuters
According to a news report published by Reuters news agency, a decision to cut thousands of jobs in China and shut down two of four shared assembly plants has been taken by Peugeot maker PSA Group and partner Dongfeng Group. The report was based on documents of the companies and added that the aim of these moves was to cut down on losses amidst the drop in demand for vehicle sin the largest auto market of the world.
The total employees would be reduced in half to about 4,000 at the Dongfeng Peugeot Citroen Automobiles (DPCA), ahich which is the name of joint venture of the two companies and is based in Wuhan, central China. The companies have finalized plans to shut down one of the factories and sell the other one. This decision was taken last month after deliberations between the PSA boss Carlos Tavares and Dongfeng Chairman Zhu Yanfeng, claimed the Reuters report citing information from the document.
There were no comments made on the issue by both the companies. “We are working with our partners to improve the overall performance of our business in China in all its dimensions,” a PSA spokesman said.
The Reuters report also claims, based on information from sources at the French carmaker, this agreement could avert PSA withdrawing from the partnership. The sources also reportedly told Reuters that if the agreement did not go through, PSA chairman had signaled that PSA would be exiting the partnership that has been in place for the last 27 years. Dongfeng holds 12.2 per cent of the joint venture. The report also claimed that PSA could have also left China completely. 
“We’re just a whisker away from having to withdraw from China,” said one person close to the PSA board according top the Reuters report. “It really is that serious.”
The efforts of a revival by PSA come at a difficult time for businesses. While the Chinese auto market was the go to place for auto companies earlier, it has seen a contraction in the last one year and reported its first contraction for the first time since the 1990s. it is expected to further drop by another 5% in 2019.
The Chinese market was not a good hunting ground for many western auto companies even before the downturn in the auto market. This was because of change of taste of Chinese consumers who choose to go for domestic auto makers instead of the mid-market brands offered by Western brands. Even many of the Chinese partners turned out to be rivals of Westner companies.
For PSA, its issues in China had started even earlier. The company had encountered four years of dropping sale and a write off of 400 million euros ($450 million) from its DPCA stake as the joint venture now is valued at 500 million euros.
 “We’re not giving up,” a PSA spokesman said. “We are still pursuing our action plan to cut fixed costs.”

Christopher J. Mitchell

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