PSA puts brakes on Slovak car production further

By bne IntelliNews January 29, 2013

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Increasing worries over a sharp and sudden slowdown in the Slovak economy as auto exports drop, struggling French carmaker PSA Peugeot Citroen halted production at its Trnava plant on January 28, and penciled in another four idle days at the factory in February, blaming a continued drop in demand in European markets.

"Demand for new cars in Europe is continuously falling. Decreasing trends in sales transform into production cuts by several carmakers," PSA Slovakia said in a statement. The company added that it still expects overall output at its Slovak unit - which has an annual capacity of 300,000 cars - to beat at 215,000 units in 2013.

The French manufacturer is suffering even more than most European carmakers through the crisis, and last year announced thousands of layoffs in its home market as it pares back production. Thanks to its modern facilities, and the budget Peugeot 207 and Citroen C3 Picasso models it turns out, the Slovak plant has escaped such a drastic fate, but it is still the weak link amongst the plants based in the country.

While PSA announced in October it was to close the plant for 21 days due to decreased demand in European markets, the additional exposure of the Slovak plants of Volkswagen and Kia to developing markets outside the EU helped them both to record-high output in 2012. With domestic demand on the floor due to persistent unemployment, and other sectors struggling to contribute, that pair largely led Slovakia to better-than-expected growth of around 2.6% of GDP last year.

However, recent data reveals a sharp slowdown in auto sector output in the final quarter of 2012. Falling production at the plants has slammed the brakes on the country's industrial output, and has most forecasters anticipating growth will slow to as low as 1% this year, although the finance ministry is still pushing a scenario in which it manages to pull itself to 2.1% expansion.

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