Philippe Varin, chairman of the PSA Peugeot Citroen Managing Board, said the firm will close its Aulnay plant near Paris, which employs 3,000 workers, in 2014.

The company also plans 1,400 job cuts at a plant in Rennes and 3,600 across the rest of France as it attempts to stem losses due to falling sales, which have resulted in a likely loss of Euro700m this year.

The business environment continued to deteriorate in first-half 2012, with the European market now expected to end the period down 8% (versus the 5% forecast at the beginning of the year). This resulted in a 10% decline for PSA Peugeot Citroen, which is very exposed to demand in Southern Europe. Given the need to adjust inventory, Group production contracted by 18% over the period.

Capacity utilisation in the Group’s European plants fell to an average 76% in first-half 2012 from 86% in 2011. This rate is even lower in the small car segment, which accounts for 42% of PSA Peugeot Citroen sales and where most of the competing models are made in low-cost countries.

As in second-half 2011, the Automotive Division is expected to report a recurring operating loss in first-half 2012, estimated at around €700m. Since mid-2011, the Group has been consuming around €200m in cash a month, excluding non-recurring items (exceptional Banque PSA Finance dividend and proceeds from property disposals). The Group will end the first-half with a net loss.