By Leos Rousek

French automaker PSA Peugeot Citroen SA (UG.FR) halted production at its Slovak plant Monday and plans to freeze its output for an additional four days in February due to poor demand for passenger cars across Europe, PSA Peugeot Citroen Slovakia said in a statement.

European auto sales have dropped to their lowest levels in decades due to over-capacity and the economic downturn. Peugeot, one of the hardest-hit automakers in Europe, is laying off thousands of workers in France where it's also closing one its plants.

Peugeot's Slovak plant makes small-sized and low-priced Peugeot 208 and Citroen C3 models. The company is key for the Slovak economy which is heavily focused on automobile and car parts exports.

"Demand for new cars in Europe has been declining steadily," said PSA Peugeot Citroen Slovakia. "Declining trends in sales have naturally translated in production reductions at several car markers."

The statement added that the company expects to keep the overall output at its Slovak unit flat on the year at 215,000 units in 2013.

Slovakia is also home to assembly plants of Germany's Volkswagen AG (VOW.XE) and South Korea's Kia Motors Corp. (000270.SE). The three automakers produce nearly 1 million cars a year at its Slovak plants, making this Central European country of 5 million people one of the world's biggest car-makers per capita.

Write to Leos Rousek at leos.rousek@dowjones.com

Go to http://blogs.wsj.com/emergingeurope for the new WSJ and Dow Jones blog on Central and Eastern Europe, covering business, politics, society and more, written by our correspondents across the region.

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