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France to unveil $7.7 bn automakers aid measures

France to unveil $7.7 bn automakers aid measures
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First Published: Mon, Feb 09 2009. 05 01 PM IST
Updated: Mon, Feb 09 2009. 05 01 PM IST
Paris: France is set to unveil details of a plan to support its ailing car industry later on Monday, as both Renault and PSA Peugeot Citroen are set to announce weak 2008 results later this week,
President Nicolas Sarkozy will meet the heads of the car firms and the prime minister on Monday.
The French carmakers employ many thousand of workers in France and jobs and factories are at risk due to the global credit crisis that has pulled car sales down sharply.
French newspapers said Sarkozy will announce on Monday that the government will lend around €6 billion ($7.7 billion) to two carmakers to help them cope with the financial crisis. The credit would be extended on the basis of preferential rates to Renault and Peugeot Citroen, French daily Le Figaro said, without citing a source, on the front page of its Monday edition. A spokesman for Renault declined to comment.
The shares of the companies rose on the expected plan, with Peugeot adding 3.7% and Renault 1.35%.
Each of the companies would receive €3 billion, daily Les Echos reported, also in its Monday edition.
In exchange, Renault head Carlos Ghosn and PSA chief executive Christian Streiff would commit to keeping all of their production sites in France running and safeguarding jobs, according to Le Figaro.
The French government had said it would pump up to €6 billion of aid into the embattled auto industry and stressed that car firms would have to pledge to protect French jobs and scrap bosses’ bonuses in return.
On Monday, Renault’s alliance partner Nissan Motor Co announced 20,000 job cuts by March 2010 and said it expected to report its first annual loss for 14 years.
Car sales have plummeted as the credit crunch and the worsening economic climate put the brakes on consumer spending. Blighted by stretched cash flow and bloated inventories, industry watchers have forecast a wave of consolidation in the European automobile sector.
Major European automakers have already trimmed their full-year earnings targets to reflect the deteriorating outlook and analysts say they may still miss these lowered objectives. Peugeot has been silent on its strategy, raising the prospect that it may not survive the worsening car sector crisis in its current form.
The car manufacturer, which is number two in terms of sales in Europe behind Germany’s Volkswagen AG, has faced a string of difficulties in recent months and more bad news is expected as economic conditions deteriorate.
Peugeot and Renault are due to report full-year results on 11 February and 12 respectively. Both have already reported a slump in full-year unit sales and cut profitability targets.
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First Published: Mon, Feb 09 2009. 05 01 PM IST
More Topics: Automakers | France | Bailout | Renault | Sarkozy |