Monday February 9, 08:48 PM
French car industry gets 7.8 billion euros in aid
By Philippe Alfroy
PARIS (AFP) - President Nicolas Sarkozy on Monday announced state loans of almost eight billion euros (10.4 billion dollars) for French carmakers, in exchange for pledges to keep jobs and assembly lines in France.
National champions Renault (Paris: FR0000131906 - news) and Peugeot Citroen will each receive loans of three billion euros over five years, the president announced, following crisis talks at the Elysee Palace with car manufacturers.
"This is not a gift. It is not a subsidy. It is a loan offered at a interest rate of six percent," Sarkozy said.
The state will also double its aid to auto industry suppliers, to 600 million euros, as part of a drive to protect the entire sector, which employs one French worker in 10, from the global economic storm.
Renault Trucks, which is owned by AB Volvo of Sweden, is to receive 0.5 billion euros, while Renault and Peugeot Citroen's financial services divisions will get doubled state aid of two billion euros.
Sarkozy said the aid package, which amounts to 7.8 billion euros in new funds and still needs the go-ahead from European competition authorities, was essential to protecting French industry and jobs from the slowdown.
He said France's two leading car manufacturers had made a commitment "to close no sites over the duration of the loan and to do everything to avoid redundancies," in exchange for the aid.
Since the global downturn began to bite, sending car sales tumbling, both Renault and Peugeot (Paris: FR0000121501 - news) have slashed output and shuttered plants, sub-contractors have closed and hundreds of workers have accepted redundancy offers.
Both Peugeot Citroen and Renault, which assemble 40 of their cars and together directly employ some 140,000 people in France, confirmed they had committed to holding on to their French sites and staff.
Over the next two years, Peugeot Citroen said it would launch one or two new models in each of its five French assembly plants, and would step up investment in energy-efficient technologies.
Renault said it would not lay off staff in any of its French plants in 2009.
"We want France to have an industrial sector, we want France to have an automobile industry and we want to keep production capacities on French soil," Sarkozy said.
"We have no choice. Either we allow our industries to keep on leaving, or we react with all means necessary."
The president said the accord would allow the carmakers to ensure that "an acute but temporary crisis will not destroy part of our industrial base and our auto industry skills."
The announcements came as Renault's international partner Nissan announced it was to cut 20,000 workers worldwide and pull out of a joint project with the French firm in Morocco, where they were due to open a large plant.
Sarkozy has made protecting France's iconic industries the central plank of his supply-led plan to ride out the global economic slowdown.
Speaking at the Elysee presidential palace, Sarkozy said he did not rule out taking similar action for other "major industrial sectors," to ensure "the competitiveness of our country," naming the timber industry as an example.
But the French leader will have to tread carefully to avoid triggering a row over protectionism.
Last week he angered Eastern European governments by suggesting in a television interview that Peugeot should close a plant in the Czech Republic and bring production home to France.
EU Competition Commissioner Neelie Kroes has warned Paris against tying protectionist strings to its industrial aid efforts.
France has a cash bonus to persuade motorists to trade in old car models for new, but the bulk of state aid to the sector will flow directly to the two main firms and their suppliers.
Luc Chatel, secretary of state for industry, said that as part of the deal car makers would have to forego bonus payments and focus on investment.
France "will not abandon the auto industry," Chatel said on Monday after meeting with industry representatives. "In return we ask the auto industry not to abandon France."
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