PSA-Mitsubishi Plant Opens in Russia

Just the Facts:

• Peugeot-Citroen-Mitsubishi car alliance officially launched its auto plant in Russia.
• The new plant is located in Kaluga.
• It is expected to produce 25,000 vehicles this year, including the Peugeot 308.

KALUGA, Russia — The Peugeot-Citroen-Mitsubishi car alliance officially launched its automotive plant in Russia on Friday, timed for its new line of Peugeot 308 models to benefit from an upswing in car sales spurred by the government-sponsored Cash for Clunkers program.

The new plant, which is expected to produce 25,000 vehicles this year, is located in Kaluga, a popular hub for a number of automotive industries that has developed a reputation as Russia's Detroit.

The plant's assembly line started working under test conditions at the beginning of March and produced its first car, a Peugeot 308, on March 9.

The plant is expected to be fully operational in March 2012, when it is to churn out about 160,000 cars annually, including 85,000 midsize cars under the Peugeot and Citroen brands and about 40,000 crossovers from the three brands in the alliance. Of these, 24,000 are expected to be produced under the Mitsubishi brand.

When full-cycle production takes off in 2012, the plant is intended to employ 3,000 workers to operate its assembly line and perform frame-welding and body-painting operations.

The alliance said it would invest about $705 million in the facility, up from the $396 million announced earlier.

PSA Peugeot Citroen's CEO, Philippe Varin, said Friday that the plant will kick off by assembling Peugeot 308 models and will later start production of the Citroen C4, the Citroen C-crosser and the Peugeot 4007.

The assembly of the Mitsubishi Outlander XL, he said, will begin in September, adding that the focus for the alliance is to produce models that are popular with Russian consumers.

The Peugeot 308 represents 39 percent of all cars sold under the Peugeot brand in Russia, while the Citroen C4 represents one-third of cars sold under the Citroen brand, Varin said.

Russian consumers should be able to buy the locally assembled Peugeot 308 using their $1,700 scrappage vouchers, since Peugeot has already applied to participate in the program.

Varin said many Russian consumers could benefit from lower prices for the locally assembled Peugeot 308 models but noted that no such price reduction is expected for the locally assembled Mitsubishi Outlander XL.

Takashi Nishioka, chairman of Mitsubishi Motors Corporation, confirmed that Russian consumers would not see lower prices for the locally produced Citroen C-Crosser, Mitsubishi Outlander XL and Peugeot 4007 crossover.

"We are not planning to reduce the prices because of the local production sites," Nishioka told the local RIA Novosti news agency.

"This operation will be a cornerstone in our efforts to grow our Russian business in the mid- and long-term and hope that we can contribute to the development of Russia's automobile industry," he said.

Peugeot-Citroen first announced plans to build the plant in Kaluga in May 2007, and company executives inked an agreement with the Kaluga regional government in December of the same year. Mitsubishi became a co-investor in the project just before construction work began in June 2008.

Inside Line says: Russia's Detroit gets another major facility. — Tai Adelaja, Correspondent