PSA said the small car segment has seen a considerable broadening of the product offering, which made an impact on 206 sales volumes.
“Since the beginning of the year a number of internal actions were taken at Ryton to match production to demand more accurately.
“These are no longer sufficient and it has therefore been necessary to take the decision to end the ‘C’ Shift at Ryton,” says PSA.
The plant will return to the two-shift operation that was worked at the site from 1988 until 1999 and which was originally planned for the lifetime of the Peugeot 206 when it was launched in 1998.
This return to a two-shift system has also recently taken place at other European plants within the PSA Group.
PSA intends to start both voluntary redundancy and early retirement programmes. Redeployment opportunities at other sites will also be explored.
Trade unions have vowed to oppose compulsory redundancies.
Peugeot's decision is the latest blow to Coventry's car industry. Jaguar shut production at Brown's Lane last year.
A spokeswoman for the Transport and General Workers' Union (TGWU) says: "While the job losses are bad enough, the concerning issue is Peugeot's failure to highlight a new model for the 206.
"We are, therefore, looking to talk as a matter of urgency to the chairman of the company and trade secretary Patricia Hewitt to resolve this and secure a long-term future for the plant."