PSA Recovery Takes Step Forward With Kazakhstan Deal

PARIS – French ministers were disappointed when PSA Peugeot Citroen announced last summer that it needed to lay off 8,000 people in order to survive Europe’s economic crisis.

But last week they were happy to help the auto maker celebrate the creation of 300 jobs making Peugeot vehicles from semi-knocked-down kits in Kazakhstan, a former Soviet republic.

An international boycott of Iran cost PSA its second-largest market after France. In 2011 it shipped 450,000 kits to its partner Iran Khodro. While the 4,000 units initially planned for Kazakhstan is tiny in comparison, the French auto maker says it hopes to send 10,000 units a year to its partner in the near future, including completely built-up Peugeot 408s.

Workers at PSA plants in Rennes and Sochaux will send SKD kits of the 3008, 508 and Partner to the assembly plant in Kostanay. Workers in Vigo, Spain, will export kits of the 301, a basic sedan the auto maker has designed for emerging markets.

PSA says the project will create 300 jobs in France and 150 in Kazakhstan.

The cars will be distributed in Kazakhstan by Allure Avto, the major stockholder in Agromash Holding. Allure also will distribute the Peugeot 408 produced by PSA in Kaluga, Russia.

Bernd Schantz, PSA’s executive in charge of Russia and the Commonwealth of Independent States, calls the Kazakhstan project an important step in the auto maker’s inroads into the CIS. “Indeed, the CIS, like Asia and Latin America, is a priority development area for the group,” he says.

“Through this agreement, PSA Peugeot Citroen will expand and diversify its presence in the region with a more substantial industrial base to serve its subsidiaries in Russia and Ukraine and its importers in Azerbaijan, Belarus and Moldova.”

Kazakhstan has France’s attention because after Russia and Saudi Arabia, it is the country’s biggest source of petroleum, and it is one of two countries supplying uranium to the French nuclear industry.

Exporting knocked-down kits also will help reduce France’s trade deficit with Kazakhstan, which was €4.8 billion ($6.2 billion) last year, according to the foreign commerce ministry. Although the trade imbalance with Kazakhstan was the country‘s sixth-largest, it still was far behind China’s €26.5 billion ($34.4 billion) and Germany’s €17.7 billion ($23.3 billion).

Last year, France exported goods worth €480 million ($624 million) to the Central Asian country, and Commerce Minister Nicole Bricq says that could double. She says France is the third-biggest investor in Kazakhstan, after the Netherlands and the U.S.