UPDATE: PSA to Close Plant, Cut As Many as 8,000 More Jobs

PSA Peugeot Citroen says it intends to further slash operating costs by shedding as many as 8,000 jobs in France, shuttering its 39-year-old small-car plant in Aulnay in 2014 and reducing output at a factory in Rennes.

The cuts are in addition to the elimination of 6,000 jobs in Europe that PSA announced last year. The new reductions include 3,600 salaried jobs across France, 1,400 positions in Rennes, which makes slow-selling large sedans, and at least half the 3,000-member workforce in Aulnay.

The company says it will offer other jobs to the balance of the Aulnay employees mostly at a nearby factory in Poissy, where PSA intends to consolidate production of the Peugeot 208 and Citroen C3 and DS3 small cars. That could reduce the latest job cuts to 6,500 positions.

PSA is promising voluntary separation packages for salaried and hourly staff. The company started the year with about 209,000 employees, half of them in France.

Union leaders vow to "wage war" to block the job cuts. France's Industrial Renewal Minister Arnaud Montebourg calls the plan an "earthquake for the French economy." He tells France2 television that job cuts must be in line with a company's "real needs" not "abusive."

CEO Philippe Varin describes the new cuts as "indispensable" in aligning capacity with sales. PSA's worldwide sales dropped 13% to 1.62 million vehicles in the first half of the year, including a 14% decline in to 994,000 units in Europe. The company says its factories in Europe ran at 76% of capacity in the first half of 2012 compared with 86% for the same period last year.

PSA plans to unveil capital spending cuts on July 25 when it reports first-half results. The company expects its automotive operations to report a €700 million operating loss for that period. PSA, which has been burning through about €200 million of cash each month, says the restructuring will enable its operating cash flow to return to breakeven by the end of 2014.