Gov't says carmakers must stay in France in return for aid

The French government says it is willing to offer the auto industry financial aid in return for assurances that carmakers will not move factories overseas and will instead commit to a long-term future in France.



REUTERS - The French government said on Monday it was ready to act to save the automobile industry in return for commitment to preserving sites in France.


Automakers are struggling with orders stalling and financing difficult to come by, junior industry minister Luc Chatel told reporters after a government meeting with industry executives.


The government would be prepared to offer new forms of aid, such as loans or guarantees, which would have to be developed in conjunction with European partners and the European Commission, French President Nicolas Sarkozy told the industry chiefs.


But any measures would require strong commitment from French car makers to a long-term future and business development in France.


"We are ready to do whatever is necessary to save our automobile sector," Chatel said.


Sarkozy planned to hold a further meeting with industry heads at the end of January for an update, following a study of possible measures to help the country's auto sector be a net exporter again and regain market share.


Meeting participants including PSA Chief Executive Christian Streiff, Renault Chief Operating Officer Patrick Pelata and Valeo Chief Executive Thierry Morin declined to comment to reporters as they left the meeting.


Like their counterparts across the globe, France's carmakers have been hit by a sharp downturn in demand as the financial crisis has spread to the manufacturing industry, and thousands of jobs are expected to be lost.


U.S. President George W. Bush said in recent days he may tap a $700 billion financial industry bailout fund to help rescue the United States' struggling auto companies, though he said on Monday an announcement was not imminent.


Sarkozy has pledged repeatedly that he would not abandon the sector, which he sees as the heart of France's manufacturing industry.


He said help for the carmakers made up a significant part of a 26 billion euro ($35 billion) stimulus package announced earlier in the month.


But while not as precariously placed as the so-called Big Three U.S. companies, French automobile makers are facing massive problems, creating a growing political headache for a government that says the sector supports one in 10 French jobs.


"(The year) 2009 will be a year of living dangerously, when anything might happen," Renault Chief Executive Carlos Ghosn was quoted as saying in France's Le Monde newspaper. "No-one is going to get out of this crisis unscathed."


New car registrations were down 14 percent year-on-year in November in France as car sales across the world slumped, and worse is expected.


"I do not see a quick end to the crisis the automobile sector is going through," Ghosn told French media. "We have not yet touched bottom."


France's largest carmaker, Peugeot-Citroen, has announced plans to cut 2,700 jobs in France and the second biggest producer, Renault, has pledged to cut 6,000 jobs across Europe and temporarily close plants to match a halt in demand.


Industrial production data released last week showed output in the car industry fell by 14.3 percent in October, the sharpest fall in almost a decade and with many plants shut in December and January, even sharper falls are expected.


Sarkozy has pledged 1 billion euros to help unblock the frozen car credits branch by the end of January and offered a 1,000 euro handout to car buyers trading in old vehicles for more environmentally friendly models.



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