Peugeot stays silent on future of Coventry

The French car maker Peugeot Citroen failed to lift the cloud hanging over its Ryton plant in Coventry yesterday as it warned that rising raw material costs would bite into profits this year.

The French car maker Peugeot Citroen failed to lift the cloud hanging over its Ryton plant in Coventry yesterday as it warned that rising raw material costs would bite into profits this year.

Announcing a 9 per cent fall in net profits last year to €1.36bn (£940m), the company said earnings this year from its car-making division would be reduced by between €250m and €300m due to the higher costs of components, mainly steel.

At the operating level, Peugeot expects to improve margins under French accounting rules but under the new international standards it is adopting, profits will remain flat at best or fall.

Jean-Martin Folz, Peugeot's chief executive, declined to say whether the Ryton plant had a long-term future after production of the 206 model comes to an end. Peugeot had originally planned to build the successor to the 206 at Ryton. But by the time Brussels finally gave its approval last September to a £14.4m grant from the UK Government to support the investment, Peugeot had decided to build the car elsewhere.

The plan now is to continue production of the 206 at Ryton for as long as there is demand. But beyond that there is no certainty of the plant's survival and no new model earmarked for it.

Peugeot axed 700 jobs at Ryton last year and scrapped the plant's fourth shift, blaming falling demand for the 206 from Continental Europe. Last year Ryton made 180,000 of the 800,000 206 models that Peugeot sold worldwide.

M. Folz said he believed production of the 206 could continue for "quite a long time" but refused to put a date on it. He added that the UK's absence from the euro would be "one part of the issue" when the French car maker came to decide on further investment in Ryton.