Peugeot-Citroen Chooses Spain to Build New Model

The new middle-range car was designed to meet demand in developing countries.

PSA Peugeot Citroen said on May 25 it has chosen its Vigo site in northwestern Spain to build a new model specially designed for emerging markets. The company said the middle-range new car, to be sold under both the Citroen and Peugeot marks, was designed to meet demand in developing countries where a middle class is beginning to emerge and drive consumer markets.

Initial markets will be countries around the Mediterranean Sea, in the Middle East and Africa for a car which marks just the first step in a major program to tap the rising middle classes, it said.

The Vigo plant, located near a major port that eases the logistics of shipping to these regions, is the company's largest, producing just under 385,000 vehicles last year with a workforce of more than 7,000. It currently makes two versions of the Citroen C4 Picasso, a hot-selling compact multi-purpose vehicle that was launched in 2006, as well as two light vans.

Peugeot Chief Executive Philippe Varin said the introduction of the new model was part of the company's strategy of boosting its presence in developing nations where there is growing demand for automobiles from first-time buyers. "Vigo is just the first step in this global program; the next stage will be Asia and then Latin America," he told Dow Jones Newswires in an interview.

The company is looking to reduce its reliance on the European market, where it currently sells two-thirds of its vehicles.

It has identified China as a priority market. It aims to boost its market share in the fast-growing country to around 10 percent by 2020 from just over 3% at present.

Peugeot's announcement comes at a time when several other large automakers in Spain have already taken measures to cut their workforces due to the global economic slowdown, adding to the country's unemployment rate of 20%, the highest in the eurozone.

Opel, Nissan, Ford and Honda have all announced job cuts in Spain since the global financial crisis erupted at the end of 2008.

A representative in Vigo of Spain's largest trade union, Comisiones Obreras (CCOO), which represents area autoworkers, welcomed Peugeot's move. "If this is the case, it is good news. It will provide stability to the plant, to the staff, to the region. We are waiting for details regarding the investment and regarding when the new model will be launched," he said.

Press reports earlier said Peugeot-Citroen opted for Vigo over Poland or Turkey because the plant offered the lowest cost base.

Spain's auto manufacturing sector is the third-biggest in Europe, although it has no national automaker besides Seat, which is owned by Germany's Volkswagen.

It accounts for 6% of the country's gross national product and employs some 350,000 people directly or indirectly.

Copyright Agence France-Presse, 2010

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