PSA and the French government's 'socialist' agenda

Bruce Gain is an Automotive News Europe correspondent in France.Bruce Gain is an Automotive News Europe correspondent in France.
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The French government's influence over PSA should remain limited despite it getting a spot on the automaker's board.

The board seat was part of a deal in which the government gave PSA a 7 billion euro loan to keep its car-loans arm afloat.

Contrary to media reports, the French government's seat should not hinder ongoing alliance negotiations between PSA and General Motors because the role is limited to having a "friendly" representative on PSA's board, Carlos Da Silva, an analyst for IHS Automotive, told Automotive News Europe.

Whether PSA and GM can agree on the final terms of their agreement does not have much to do with any French political agenda, Da Silva said. "The French government now has somebody on PSA's 'conseil de surveillance' who can bring the state's voice into all the debates, but nothing more," Da Silva said. "They have no veto power or anything. It is just another point of view that will be expressed."

The government has repeatedly criticized PSA's decision to eliminate 8,000 jobs on French soil and close its car plant in Aulnay-sous-Bois, France. PSA, however, has openly rebuffed the government's subsequent demands.

"When the government said they wanted PSA to reconsider the number of layoffs for its upcoming social plan, PSA just answered: 'OK, well received, but we are talking with the unions and we'll deal with them,' " Da Silva said.

The French government also struggles to convince Renault to keep production work in France, even though Paris has a 15 percent stake in the company.

Morgan Stanley says that by 2015 about 60 percent of the Renault Clio's volume will be produced in Bursa, Turkey, which will be a big blow to the company's Clio-making factory in Flins, France.

"Renault is a less 'patriotic' producer than PSA, when measured in the share of vehicles built in France," Da Silva said.

A common misconception about France, especially in the United States, is that France is a "socialist" country, an opinion shared by those who know little about France's political system. President Francois Hollande, for example, represents the Socialist Party in France, but he is actually further to the right than President Obama on many issues.

With a seat on PSA's board, the French government may actually vote with PSA's other board members and the Peugeot family in favor of moving jobs outside of France, if it makes good business sense. And it may even secretly back PSA's moves to use its alliance with GM to reduce the French carmaker's capacity in France.

"Both PSA and GM need to restructure in Europe and in this mature type of market, one company plus another company equals something less than two," Gaetan Toulemonde, an analyst for Deutsche Bank, told Automotive News Europe. "I think this will put the government in a very strange situation when they will have to back restructuring even though they might not want to back it."

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