PSA Puts Factory in India on Hold

PSA Peugeot Citroen has suspended plans to build a €650 million ($853 million) manufacturing complex in India's western state of Gujarat because of the company's financial woes, CarTrade.com reports.

The Mumbai-based online auto data provider cites an unidentified senior executive of Gujarat Industrial Development Corp. who says PSA's 600-acre land allotment contract in the city of Sanand has been canceled.

The company unveiled plans a year ago to begin producing the Peugeot 508 family sedan at the new plant in 2014. The facility would have initial annual capacity of 170,000 vehicles and also make engines and transmissions. The Sanand factory was to mark PSA's return to manufacturing in India after it ended an unsuccessful joint venture there with Premier Auto in 2001.

The company said in January it might postpone the plant's opening but would not cancel the project. PSA insisted that India remains a key strategic market in its effort to boost sales outside Europe to 50% of revenue from 39% now. The New Delhi-based Economic Times speculated at the time that the company might seek a partner to help defray manufacturing costs in India.

PSA posted an €819 million net loss in the first half of 2012 as its vehicle sales in Europe dropped 15%. The company said it was slashing capital expenditures companywide by €550 million but did not mention the India factory.