Unions back Peugeot's cost-cutting plans to attract investment Peugeot has received union backing for its cost-cutting proposals, overcoming a key hurdle for the embattled French carmaker as it tries to drum up fresh investment. The carmaker, hit hard by the worst European car market for two decades and bleeding cash, is in talks with Chinese carmaker Dongfeng for a potential capital increase that could also involve the French state taking a stake. Four of Peugeot's six main unions representing almost 65 per cent of its workforce have backed plans to cut overtime pay and freeze salaries, the company said. The agreement will be officially signed on Thursday. The Force Ouvrière (FO) union said yesterday that around 90 per cent of members have indicated that they are in favour of signing the contract, with the union adding that it was to preserve the jobs of workers in France. "Although the European automotive crisis largely explains the situation of PSA Peugeot Citroën, FO does not absolve the management, who have accentuated the crisis with years of strategic mistakes," the union said. The agreement is seen as ironing out a possible snag in any investment talks, with Peugeot's inefficient French manufacturing base considered by many financial analysts tracking the company to be one of its biggest impediments. "This is a big deal, a big step forward," PSA spokesman Jonathan Goodman said. It's important in terms of increasing the efficiency of our plants. Peugeot, which burnt through €3bn in cash last year, has turned to Chinese partner Dongfeng for a possible funding injection that would allow it to invest in new products and expand its footprint away from a crippling reliance on the moribund European market, which will shrink for a sixth straight year in 2013. A Chinese stake would be politically sensitive, and so the government is weighing up taking a stake itself to maintain French control, according to people close to the discussions. Arnaud Montebourg, the French industry minister, hinted as such in an interview in Le Parisien on Tuesday, where he said that PSA "will remain a French company." Asked if this meant that Dongfeng would not be taking a stake in the company, Mr Montebourg said: "I didn't say that. What I'm saying is that the company will stay in France and will remain French. Any capital increase would likely mean that the Peugeot family would lose control of the company it founded in 1882, and could pour cold water on a so-far successful purchasing and design partnership with US carmaker General Motors. GM, which owns 7 per cent of the automaker, has the right to end the alliance if a new investor comes on board. Investment options are likely to be discussed at the company's board meeting on Wednesday ahead of the release of third-quarter financial results on Thursday. The CFE-CGC, SIA, CFTC and FO unions have agreed to back the cost-cutting measures, which come with investment promises from the company and guarantees for future models to be made in French factories. Peugeot opened talks with the unions on the agreement in May. The plan comes a little more than a year after the carmaker announced 6,000 job cuts and the closure of its Aulnay factory, the first major French car plant to shut for 30 years. Plant closures and cost-cutting measures such as reduced shifts and extended lay-offs have been common in Europe's car industry over the past few years, with Fiat, Ford and GM shuttering factories as slumping demand leaves costly production lines lying idle.