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French govt tells PSA to review Varins future pension benefits

2013-11-29 09:52:59     by

Tags: PSA ,Varins

  The French government told PSA/Peugeot-Citroen today to review an "inappropriate" pension award to outgoing CEO Philippe Varin for which it has set aside 21 million euros ($28.5 million) in provisions.

  In last year's accounts, PSA set aside just under 21 million euros to cover its pension obligations to Varin as of Dec. 31, 2012.

  The provision is designed to cover payouts of 310,000 annually over 25 years, the spokesman said. The automaker added that the 21 million euro provision does not constitute a benefit payable to Varin upon his retirement. Most of this provision comprises taxes and contributions, PSA said.

  PSA announced this week that Varin would be replaced next year by former Renault No. 2 Carlos Tavares some time in 2014.

  Ministers and trade unions are upset that Varin, 61, who will step down three years before the end of his current contract, will receive an annual 310,000 euro pension net of tax and social charges upon his retirement at 65.

  "Given PSA's difficulties and given that the state has already guaranteed [car-lending arm] Banque PSA finance for 7 billion euros, we have asked for some very thorough explanations from PSA on the financial arrangements of his retirement," Industry Minister Arnaud Montebourg said.

  "Things must be reconsidered," Finance Minister Pierre Moscovici told reporters, standing by Montebourg's side as the two ministers left a cabinet meeting.

  The French carmaker is cutting more than 10,000 jobs as it struggles to recover from a six-year European market slump.

  PSA and Dongfeng are in talks to build on their existing Chinese joint venture with cooperation in other markets and a share issue that could see Dongfeng and France's government acquire stakes in the French carmaker, sources familiar with the matter have said.

  In keeping with company practice, Varin will receive no severance payment when he leaves the group, unlike most of his counterparts at other major French companies. Speaking on French radio, Varin confirmed he would receive a net annual amount of 310,000 euros but said that did not mean he would end up receiving the total 21 million for which PSA has provisioned "now or any time later."

  Under fire

  Earlier, other politicians joined criticism of Varin's pension, led by the CGT union that drew attention to it. Jean-Louis Borloo, a former minister who served in France's last right-wing government and now heads the centrist UDI grouping, said the pension plan was an example of "excessive" compensation packages. "It has been known for executives to give them up," Borloo said. "The important thing is to save PSA."

  Francois de Rugy, joint parliamentary chairman of the minority governing EELV party, condemned what he called "double standards" between the treatment of PSA executives and workers who recently made concessions on pay and conditions. "This is too much," he said. "There's a whiff of indecency about it."

  Varin has received no bonus since 2011, a company spokesman said, and his pension arrangements are more modest than those at other French corporations.

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