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Paris - Peugeot-Citroen on Friday slashed its full-year targets and announced "massive" production cuts after third-quarter revenue shrank 5.2%.
Chief executive Christian Streiff said the company is reacting to the "collapse" of the European auto market, cutting production to prevent a buildup of inventories, raising prices to offset raw materials costs and cutting costs.
European auto sales are being whacked by the credit crisis, which makes it harder for customers and dealers to pay for cars, and flagging consumer confidence as many European economies enter recession.
Shares in Peugeot-Citroen slumped 12.4% to €15.68 in Paris after the market opened.
The Paris-based auto maker said sales in the three months through September fell to €13.3bn from €14.02bn.
Anticipating a 17% drop in the European market in the fourth quarter, Peugeot-Citroen said it now expects its global sales volumes to fall 3.5% from 2007. Previously it had been expecting volumes to grow 5% this year.
Europe's second-largest car manufacturer by sales reduced its target for operating margin - a measure of earnings from ongoing operations - to 1.3% for 2008 from 3.5%.
"We have reacted very swiftly to this market collapse with exceptional measures to cut production, even though this is obviously detrimental to our 2008 operating margin," Streiff said in a statement.
"Massive production cuts will be made in the fourth quarter as it is vital that we are correctly positioned to face 2009."
Shares in cross-town rival Renault dropped 10.5% to €22.71. The auto maker cut its full-year profit targets after market close on Thursday and said third-quarter sales had fallen 2.2%.
Also on Thursday Germany's Daimler reported a fall in North American sales and abandoned its 2008 earnings forecast and Italy's Fiat Group SpA warned sales could drop 20% next year.
In the third quarter, Peugeot-Citroen said that registrations in France, which had received a boost from government incentives to buy more environmentally friendly vehicles, were flat. Germany turned negative, and the decline in Spanish and UK markets accelerated.
In Russia, the rate of growth in new registrations slowed to 12% in the quarter. The pace of growth also diminished in the Brazilian and Argentine markets. Registrations fell 6% in China.
- AP