Union Agrees to Peugeot's Cost Cutting Labor Agreement

By David Pearson

PARIS--One of the main labor unions at French automaker PSA Peugeot Citroen (UG.FR) Monday said its members have signed on to a new labor agreement hammered out after months of negotiations.

The Force Ouvriere union said 90% of its members have accepted the terms of the accord in which management is offering work guarantees in exchange for more flexibility in working hours, days off and a temporary pay freeze.

Three other unions--the non-affiliated SIA, the CFTC and CFE-CGC--are expected to say later this week that are also accepting the terms of the agreement. However, the CGT union has said it won't sign on to the agreement, and the CFDT hasn't made its position clear.

Management, which expects to derive annual cost savings of 100 million euros ($136.9 million) from greater labor flexibility, has pledged to put one new model into each of its French assembly plants, and will maintain production at a level of one million vehicles a year through 2016, compared to 930,000 at present.

Industry analysts say the labor agreement should serve to reassure Chinese auto maker Dongfeng Motor Co Ltd (0489.HK), which is considering a deeper partnership with Peugeot that could involve it taking a stake of more than 20% at the automaker.

Peugeot's board will discuss an eventual capital increase at a meeting on Tuesday.

Write to David Pearson at [e-mail]

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