PARIS (AP) — Europe's economic crisis pushed carmaker PSA Peugeot Citroen into a first-half loss of €819 million ($990 million), just as the company is set to clash with the French government over its restructuring plan.
The maker of two-thirds of France's cars is being hit by a deepening recession in many markets in Europe, its main market. The company's share price has more than halved since March.
But on Wednesday, the stock price surged when the Paris bourse opened and was up 3 percent in early trading. The company's promise to stick with a controversial cost-cutting plan and a government plan to support the industry expected later in the day buoyed investor confidence.
Nonetheless, U.S. ratings agency Fitch Wednesday downgraded the automaker's credits score from BB+ to BB, warning that further downgrades might be possible.
Peugeot's first-half loss contrasts starkly with a profit of €805 million in the same period last year and came on the back of a 5.1 percent fall in revenue to €29.6 billion.
The company doesn't expect Europe to pick up anytime soon, saying Wednesday that it expects its market to contract by 8 percent this year.
In response, Peugeot announced earlier this month that it would close a major factory in France and cut 8,000 jobs — part of a plan to save €2.5 billion by 2015. Those savings will also come from efficiencies gained by an alliance with General Motors. About half — €1 billion — of those savings will come this year alone.
"The group is facing a difficult time," Chairman Philippe Varin said. "The depth and persistence of the crisis impacting our business in Europe requires the launch of the reorganization of our French production and a reduction in our structural costs."
Varin said he understood how hard it would be for laid-off workers but that the company planned to see its plan through.
But the company's cost-cutting plans have been criticized by President Francois Hollande's Socialist administration, which has said the restructuring is unacceptable and that it will force Peugeot to save some of the jobs it trim.
On Wednesday, the government will unveil a plan to support the auto industry — part of its carrot-and-stick strategy with Peugeot. It's expected to give incentives to French consumers to buy French cars and to support the clean-energy vehicles that the company excels at.
But much of Peugeot's problems stem from a glut of cars in the European market, and it's unclear how much the government can do for the company. France's car industry had already been given a bailout under former President Nicolas Sarkozy.
The problems have touched car companies across the continent, where industry executives estimate factories have the capacity to build 20 percent more cars than they are able to sell.
Sweden's Volvo reported Tuesday that its second-quarter net profit fell 5 percent, while Germany's Daimler said Wednesday that profit for the quarter pulled back 11 percent.
Europe's economic crisis pushed carmaker PSA Peugeot Citroen into a first-half loss of $990M, just as the company is set to clash with the French government over its restructuring plan.