In an interview with French newspaper Le Monde, Varin said PSA Peugeot Citroen (IW 1000/43) studied all other options before finally deciding on shutting down the plant and cutting jobs in France.
"We looked at all alternatives. We cannot have factories that work at half their capacity, in the long term, when the European market has shrunk 25% in five years," Varin said.
PSA, the biggest French carmaker and second in Europe to Germany's Volkswagen, announced last week that it would cease production at Aulnay, which employs 3,000 people, with 1,400 jobs also going at its Rennes plant and about 3,600 jobs to be cut across the corporate structure.
The announcement sparked union anger and underlined the difficulty for French industry in competing in international markets, a key factor in the stagnation of its economy.
In an interview on Saturday, President Francois Hollande said that the plan is "not acceptable" and will have to be renegotiated.
Cost Cuts Outside France were Considered
Varin said that the company looked at reducing costs outside France but decided against cuts at its Trnava plant in Slovakia, where labor costs are much lower, or at its factory in Madrid, which is too small to have much impact.
He also highlighted the crucial role of the PSA Peugeot Citroen group, which is owned by private shareholders and is quoted on the stock market, in the French economy and suggested it may be suffering from its decision to focus on production in France.
"Forty-four percent of the group's production is French. We contribute positively, up to 10 billion euros ($12.3 billion), to France's trade balance," Varin said, noting that Peugeot employs 100,000 people in France.
But asked whether its "economic patriotism" has damaged the company's strategic planning, Varin said: "It is no doubt one of the reasons. The group's internationalization took some time."
France's Minister for Industrial Renewal Arnaud Montebourg was to hold talks with union representatives on Tuesday to discuss the job cuts and was to meet with Varin on Wednesday.
Copyright Agence France-Presse, 2012
