Troubled French carmaker PSA Peugeot Citroen signed Thursday a deal with unions to limit wage hikes and increase flexibility as it seeks to restructure its operations in the face of a slump in European auto sales.

The deal will see no general wage hike next year, with a raise for the next year depending on an improvement in the company's performance.

In return the biggest French carmaker, Europe's second-biggest after Volkswagen, pledged to increase output and assemble one new model at its five remaining French factories through 2016.

Peugeot shocked France in the middle of last year when it announced plans to cut 11,000 jobs between 2012 and 2014 and to shut its plant at Aulnay outside Paris as it attempted to get to grips with its overcapacity.

The Aulnay plant assembled its final car this week.

The deal will also give the company greater flexibility over working hours.

"The agreement's balanced efforts will help make us more competitive and contribute to improved profitability in Europe," chief executive Philippe Varin said in a statement.

The company suffered a 5.0-billion-euro ($6.7-billion) loss last year as car sales in Europe hover near 20-year lows, and the French government had to rescue its financing arm last year.

Peugeot said Thursday that sales in the third quarter fell by 3.7 percent on a 12-month comparison to 12.1 billion euros, but the company and many other carmakers predict the European car market will begin to recover next year.

Part of Peugeot's restructuring has been an alliance with the US group General Motors, but there have been rumours the French state and Chinese group Dongfeng may come in as shareholders to help boost the company.

 

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