France considers aid for Renault, Peugeot Citroën

20 January 2009

After the American government's bailout of its beleaguered auto industry (See: General Motors gets $4 billion US government loan, Chrysler still in talks), the French government is reportedly looking at a similar package for French manufacturers Renault SA and PSA Peugeot Citroën. However, the administration has made it clear that any official aid is conditional to the companies' willingness not to retrench workers and Chrysler receives $4 billion from US treasury

"We will not give the financing without concrete pledges from the auto makers," said Luc Chatel, the junior industry minister who is preparing recommendations for President Nicolas Sarkozy on how to save the French auto sector. He said the negotiations with the carmakers on this point were "very difficult," but said the demand was logical and it was "in the public interest" to preserve jobs. The auto industry is one of France's major employers, providing jobs for around 10 per cent of the French work force.

The minister's comments came at a summit organised by the French government to address the crisis surrounding the automobile sector. At the same venue, Renault chief Carlos Ghosn, who is also president of the European car makers association, said the auto industry is facing a "brutal" fall in auto sales combined with tight credit conditions. "In these conditions, the rapid, determined and coordinated intervention of governments and European institutions is needed, given the importance of the automobile industry in Europe," he said.

The minister assured the industry, "The president made a strategic decision: We will not let our car industry fail.'' In response to the crisis, the government already has announced a series of measures, including a € 1,000 bonus for French consumers who trade in old cars for new lower-emission models. France also made €1 billion in low-interest loans available to the finance arms of both French carmakers, which help customers finance car purchases. That plan could be extended.(Also see: France unveils €26-billion recovery plan)

The No1 French auto manufacturer PSA-Peugeot Citroen employed over 207,000 people, of which around 113,000 people in France, at the start of 2008. It announced a plan to cut 3,550 jobs in November. It has already reduced its headcount by 7,400 since 2007 through voluntary redundancy.

Peugeot said in October it would cut fourth quarter 2008 production by 30 per cent compared with its original forecast. Many of its sites were closed for extended year-end breaks.

It said in January it planned to scrap the night shift at its Sochaux site, where the medium-sized Peugeot 308 model is built. In October, Peugeot cut its 2008 profitability outlook to 1.3 per cent, from an earlier target of 3.5 per cent. It is due to present full year results on 11 February.

France's second largest carmaker Renault had a worldwide workforce of over 127,000 at the start of 2008. The company said in September it planned to cut 6,000 jobs in Europe, of which 4,000 in France.