1987 Peugeot 205 Gti on 2040-cars

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Automakers face reality of EVs' cost — to jobs, and their bottom line

Related: We obsessively covered the Frankfurt Motor Show — here's our complete coverage FRANKFURT, Germany — European car bosses gathering for the Frankfurt auto show are beginning to address the realities of mass vehicle electrification, and its consequences for jobs and profit, their minds focused by government pledges to outlaw the combustion engine. As the latest such announcement by China added momentum to a push for zero-emissions motoring, Daimler, Volkswagen and PSA Group gave details about their electric programs that could give policymakers some pause. Planned electric Mercedes models will initially be just half as profitable as conventional alternatives, Daimler warned — forcing the group to find savings by outsourcing more component manufacturing, which may in turn threaten German jobs. "In-house production is almost irrelevant to the consumer," Daimler boss Dieter Zetsche told reporters on the eve of the Frankfurt Motor Show, in the midst of a German election campaign in which automotive jobs have loomed large. The company set a target of saving 4 billion euros ($4.8 billion) by 2025 to help fund the cost of its electric cars. "Daimler is the first company to state explicitly how much electric vehicles are going to hurt margins," said Bernstein analyst Max Warburton. "It was brave to go first — but of course it won't be the last." Volkswagen, for its part, said it was seeking new global supplier contracts to source 50 billion euros ($60 billion) of electric car content including batteries, which are not yet manufactured competitively in Europe. "A company like Volkswagen must lead, not follow," Chief Executive Matthias Mueller told reporters. VW diesel emissions-cheating exposed by U.S. regulators in 2015 triggered global public outrage, dozens more investigations into test-rigging by the wider industry and a push by some lawmakers to ban diesel and eventually all engines. TIGHTENING NOOSE Tesla shares jumped nearly 6 percent on Monday after a Chinese minister said it was a question of when, not if, Beijing bans fossil-fuel cars, tightening the noose around the combustion engine. France and Britain have promised its outright abolition by 2040. But PSA, the maker of Peugeots and Citroens, said it was concerned about the risks if consumers were left behind in the rush, and a new generation of battery cars does not sell.

PSA plans to cut 8,000 jobs

The French government has said that PSA/Peugeot-Citroën must make large job cuts in order to stay financially afloat. A large restructuring would also need to take place as the carmaker deals with the current European economic climate and a production capacity excess.
According to an Automotive News Europe report, the government of France launched an investigation into the "financial health" of PSA, and its results subsequently criticized several decisions the company made, including the shuttering of plants near Paris without leaving failsafe options for production like its Madrid factory.
The result of the study is that the French automaker plans on cutting 8,000 jobs - on top of the 3,500 axed last year. Also planned is the closing of its Aulnay plant near Paris, along with a significantly downsized workforce at its Rennes plant in western France. Last year, PSA's small car plants were running at only 61 percent of maximum capacity.

Peugeot warms things up with new 308 GT

Peugeot chose wisely when it got back into the hot-hatch game. Instead of going after the big boys, it went small with the 208 GTI, which arrived around the same time as the latest Renaultsport Clio. Where Renault went with a crowd-pleasing five doors and a dual-clutch gearbox, Peugeot went old-school with three doors and a stick shift. Bolstered by positive reviews, Peugeot's been widely expected to apply a similar formula to the larger 308, but instead of going for Golf R territory, it's guardedly going after the GTI instead.
The new 308 flagship model packs a 1.6-liter turbo four - the same engine in the 208 GTI, not to mention a host of other PSA and Mini models - but with a touch more output, now up to 202 horsepower and 210 pound-feet of torque, driven to the front wheels through a six-speed manual transmission to send the 308 GT to 62 in 7.5 seconds (lamentably a full second off the pace of the VW GTI). It also gets a retuned and lowered suspension, upgraded brakes and rolling stock and sportier trim, but that's not the end of the story.
In addition to the five-door hatchback, Peugeot is also offering the 308 GT in wagon form, just like the Ford Focus ST. It's also offering a diesel option with a six-speed automatic. The 2.0-liter turbodiesel four packs 177 hp and 295 lb-ft, roughly comparable to the Golf GTD and new diesel Focus ST.