Macron to inject $9bn into ailing car industry

Bloomberg

President Emmanuel Macron unveiled a raft of measures aimed at reviving France’s struggling car industry and drawing manufacturing back to local factories.
The plan includes incentives for the purchase of electric cars, cash-for-clunkers to encourage consumers to trade in older, more polluting cars and subsidies for struggling car-parts makers. The total of roughly 8 billion euros ($9 billion) also includes state-backed loans such as 5 billion euros slated for Renault SA.
The presidential announcements highlight the crucial role the auto sector plays in the French economy and how hard it has been hit by coronavirus.
The auto plan is one of a trio of industrial stimulus packages pledged by Finance Minister Bruno Le Maire in recent weeks. The state already earmarked 18 billion euros for the tourism industry and is preparing to help the aviation sector as well. The car industry employs 400,000 people in France, with roughly 30 vehicle and parts factories dotted across the country.
Macron’s package kicked off a decisive few days for Renault, which is set to announce sweeping cost cuts Friday. Along with Peugeot-maker PSA Group, the carmakers are among France’s largest manufacturers and were behind
historic models like the Citroen 2CV and Renault 4. France owns stakes in both the companies.
The extended cash-for-clunker subsidies and bonus for electric and hybrid cars should help sell some of the 400,000 vehicles that weren’t bought during the lockdown, as dealerships were shut and consumers remained stuck at home.
The effort to support demand will cost over 1 billion euros, according to Macron.
The president added a total of 750 million euros to help suppliers transition to greener car production, to which Renault and PSA will participate with 100 million euros each.
The French automotive industry is already being kept alive by the state, with some 250,000 employees being partly paid by an unemployment benefit scheme and through 300 million euros of state-backed loans, according to the president.
“We need to reboot the machine and de-stock,” Macron said. “We need for our citizens to buy more cars in the next few weeks, especially more clean vehicles. Not in two, five, or 10 years. Now.”
In exchange, the president called for automakers to commit to keep production and research in France. PSA and Renault have pledged to increase local production of electrified vehicles and components.
A 5 billion-euro state-backed loan for Renault won’t be finalized until the company, which plans to close sites in France, reaches an agreement with unions on two factories at Maubeuge and Douai, he said.
Renault is planning to shut an engine and transmission factory in Choisy-le-Roi, France, and is mulling the future of four other production sites, Franck Daout, spokesman for the CFDT union, said by phone Tuesday following meetings with Renault Chairman Jean-Dominique Senard and Le Maire.
The Flins assembly lines will make electric Zoe models until 2023, then the site could be converted to other activities, Daout said, while iron foundry Fonderie de Bretagne will likely will be sold, and the Dieppe factory and Maubeuge site are also threatened with closure.
Speaking on BFM TV later Tuesday, Le Maire declined to confirm a report in Le Figaro newspaper that the carmaker will cut 5,000 jobs. Instead, he said, the company has a production capacity to make 6 million cars and makes half that number, and “plant closures should be a last resort.”
“If we do nothing, Renault is in danger,” he said. “We won’t let Renault down. It needs to be transformed to become more competitive.”
Flins shouldn’t be closed, while the situation at Maubeuge and Douai must be examined more closely, he said.
Renault agreed to invest in a project to make electric-car batteries in Europe along with PSA and Total SA’s Saft, Macron said. To support the overall move to electric vehicles, France will also accelerate the development of charging stations, with a target of 100,000 by 2021, a year ahead of schedule.
France’s auto aid package will add to pressure on public coffers. The government has already rewritten its budget forecasts twice this year, and sees debt rising to more than 115% of annual output as it spends to avert job losses and bankruptcies.
While Macron has seen his approval rating slide, his government is rated better prepared to handle the economic slump than the health crisis.