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PSA, Dongfeng to drop 2 China auto plants

Reuters BEIJING/PARIS (Reuters) — Peugeot maker PSA Group and partner Dongfeng Group have agreed to cut thousands of jobs in China and drop two of their four shared assembly plants, according to a document seen by Reuters, in a last-ditch bid to curb mounting losses as the world’s largest auto market loses steam.

Dongfeng Peugeot Citroen Automobiles (DPCA), the carmakers’ joint venture based in Wuhan, central China, will halve its workforce to 4,000 as it closes one plant and sells another under plans agreed last month between PSA boss Carlos Tavares and Dongfeng Chairman Zhu Yanfeng, the document showed.

Both carmakers declined to comment on details of their restructuring plans. “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 agreement may avert a threatened withdrawal by PSA, according to two sources at the French carmaker who said their chief executive had signaled that PSA might otherwise exit the 27-year-old partnership with its 12.2 percent shareholder Dongfeng, or even leave China altogether.

“We’re just a whisker away from having to withdraw from China,” said one person close to the PSA board. “It really is that serious.”

PSA is attempting a reboot in adverse conditions. Once an auto industry cash cow, the Chinese market contracted last year for the first time since the 1990s and is expected to decline another 5 percent in 2019, squeezed by a worsening U.S.-China trade war.

Many Western carmakers were already struggling before the downturn, as Chinese consumers abandoned their mid-market brands for increasingly assertive domestic rivals, including the global manufacturers’ own local partners.

PSA’s deep China problems go back even further, spanning four years of plunging sales and €400 million ($450 million) written off its DPCA stake, which is now valued at €500 million.

Its sales in the country shrunk almost threefold to 251,700 vehicles last year from a 2014 peak of 731,000.

“We’re not giving up,” a PSA spokesman said. “We are still pursuing our action plan to cut fixed costs.”Speech

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