The company said the European car market will contract by 8% this year, with the market having shrunk by 23% since 2007, and that its factories were operating at 76% of capacity in the first half of this year.
Philippe Varin, PSA's chief executive, said: "I am fully aware of the seriousness of today’s announcements as well as of the shock and emotions that they will arouse in the company.
"The depth and persistence of the crisis impacting our business in Europe have now made this reorganization project indispensable in order to align our production capacity with foreseeable market trends."
It was only a few years ago that the French government started a 'bangers cash back' scheme enabling people to trade in old cars for new, low polluting vehicles, which acted as a crutch for the car industry as the economy ground to a halt in 2007.
Since then the cash amount for trading in old cars was slowly reduced, it now looks as though the support this package offered has now run dry.
The full press release: