Apr 15, 2013 12:07 PM EDT

Peugeot 11,000 Job Cuts Cleared by Trade Unions

French carmaker PSA Peugeot Citroen has received the backing of unions representing three-quarters of its workers over a plan to slash over 11,000 jobs in France and shut a plant near Paris.

After long negotiations with management, the company's central works committee approved the compensation package with union members representing 76 percent of the employees voting in favor, according to the Associated Press.

Europe's carmakers are suffering from chronic overcapacity because of the sharp fall in sales in France, Italy and Spain. But Peugeot and Renault's workforce reduction plans have also become test cases for France as it tries to improve the competitiveness of its manufacturing industry.

"A plan that is supported by unions representing more than 76 percent of employees is fully legitimate, so any other decision than the backing of that plan would be risky," Yasmine Tarasewicz, the lawyer representing the carmaker in the legal cases, told Bloomberg.

Chief Executive Philippe Varin is struggling to reduce Peugeot's fixed costs and excess production capacity amid a devastating European auto-market collapse. The French carmaker's survival plan requires it to halt mounting losses by the end of next year.

The Paris high court is due to rule on April 26 in a case brought by the left-wing SUD union to halt the planned cuts, now backed by a majority of unions including the CFTC.

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