Spain Could Be Biggest Loser in GM-PSA Alliance

MADRID – While French and German unions worry about the labor consequences of the recent General Motors-PSA Peugeot Citroen alliance, Spanish unions are preparing to protest against the economic cuts and labor framework of the new Spanish government, missing the fact they could be among the biggest losers in the auto makers’ recent deal.

Sergio Marchionne, Chrysler and Fiat CEO and current head of the ACEA, the European auto makers’ association, raised the issue of the region’s overcapacity problem, which he says stands at nearly 20%, at the Geneva auto show.

Marchionne stressed the importance of solving the issue and suggested help from the European Commission may be necessary.

GM and PSA assembly plants in Europe are running at 65%-75% of their installed capacity. If the partners are committed to reorganizing their industrial framework, it would mean putting the three Spanish plants on the table – PSA’s Madrid and Vigo facilities and Adam Opel’s Figueruelas operation.

PSA will meet with its works council here March 16 to analyze the labor implications of the alliance.

The auto maker’s Madrid plant, which employs 1,843 assembly-line workers and 466 more employees in general and auxiliary services, is struggling.

Last June, the French labor union CGT published a PSA internal report in which the closure of the Madrid plant, along with the auto maker’s Aulnay-sous-Bois and Valenciennes facilities in France, was being considered.

PSA at the time did not deny the possible shuttering of the French sites, but discarded the closure of the Madrid plant. Rather, it said a new Citroen model had been assigned there and that the report divulged by the union was considered obsolete.

But given PSA’s current poor financial circumstance, it does not need a report to spell out the obvious.

The Madrid plant builds 3- and 5-door Peugeot 207s, along with station wagon and coupe-cabriolet versions. The current range is due to be replaced starting with the new 208 this spring.

The facility produced 95,900 cars in 2011, including 56,600 3- and 5-doors, 20,500 wagons and 18,800 coupe-cabriolets. Total output was down 25.3% from prior-year.

PSA sales plunged last year in Spain, with Citroen down 27.1% and Peugeot 22.6%. ACEA data shows Citroen deliveries in all of Western Europe slid 7.8% and Peugeot sales declined 9.8%.

Given this, management and the Madrid union were forced to agree to a 42-day plant-idling plan last September, with 11 days applied in the fourth quarter and the rest to take effect in 2012.

Local management also announced 383 temporary contracts would not be renewed. But PSA decided that was not enough and eliminated the entire second shift last month.

PSA Madrid spokeswoman Carolina Lopez tells WardsAuto the auto maker does not provide production forecasts because output changes with demand. She also says the GM-PSA alliance does not contemplate production consolidation at the moment.

The Vigo plant employs about 6,500 workers and produces 356,000 units of the Peugeot Partner, and the Berlingo, C4 and Grand C4 Picasso from Citroen. The facility has an important logistic advantage near the harbor of Vigo on the northwest coast of Spain and until last year was considered the most important of PSA’s factories.

But in 2011 it was overtaken by the Sochaux plant in France, which built 373,000 vehicles, and PSA’s Chinese joint venture with Dongfeng in Wuhan, which manufactured 404,000.

Like the Madrid facility, the Vigo plant was forced to cut production in recent years. The 40-day program shut-down approved last September applied to the fourth-quarter, with a spillover of 16 days available for this year.

Vigo plant spokesman Pedro Hortas declines to provide a production forecast for 2012, but he admits that as the contraction of European car demand continues, management is talking with the union about a new idling program.

Opel’s Figueruelas facility became the most important Spanish auto plant at the end of 2011, after the Vigo factory lost the title. The plant’s 6,500 workers produced about 360,000 units of the Meriva, Corsa and Combo ranges last year.

Production of the Combo, a light-commercial vehicle, ended in November and will be replaced by a new version built in Turkey by Tofas on the Fiat Doblo platform.

Management at the Figueruelas plant announced a 62-day idling program at the beginning of September, with 16 of those days to be applied in fourth-quarter 2011 and the remainder to be used in 2012. But falling demand forced the facility to halt output for an additional four days before the end of the year, leaving just 42 days still to go.

Figueruelas, near Saragossa, is in a difficult transition stage. The plant is waiting for production to increase in 2013, when Opel’s Eisenach plant in Germany will start building the new Junio range, transferring to Figueruelas an important part – if not all – of Corsa output.

Opel did not respond to email and phone requests from WardsAuto regarding the model’s share of 2011 production, a forecast for 2012 and the state of negotiations with the unions over new idling programs.

But only the PSA Madrid plant appears to be facing imminent risk of closure in Spain.

Opel signed a compromise agreement with the powerful IG Metall union to keep its Bochum, Germany, facility running until 2014. And GM still is deciding what to do with its Vauxhall plant in Ellesmere Port, U.K. But both sites are considered at high risk of closure.

What’s more, PSA’s Valenciennes facility near Nice, France, where SevelNord, a JV between PSA and Fiat produced the Expert, Jumpy and Scudo LCV ranges, will be shuttered in 2014. Models built there are being cannibalized by the new Doblo and larger versions of the Berlingo and Partner.

Nothing has been said about the future of the 2,700 workers at SevelNord, but it is hard to believe the French unions would easily accept the plant’s closure.

PSA’s Aulnay facility east of Paris, where 135,787 Citroen C3s were produced in 2011, also is vulnerable. The French unions there are pressuring both PSA and the government with demonstrations to avoid its shutdown.

But because the French, German and U.K. governments and their respective automotive unions have infinitely more weight in decisions of foreign auto makers’ plant closings than do their respective colleagues in Spain, the high risk for the Spanish factories cannot be overstated.

Yet, even the worst scenario – the loss of more than 15,000 jobs – would be a drop in the bucket for a country like Spain, which at the moment has 5.3 million people unemployed, representing 22.9% of the active population, and is facing as many as 6 million jobs lost by the end of this year.