BRUCE GAIN

Europe's crisis forces Renault to get tough

Bruce Gain is an Automotive News Europe correspondent in FranceBruce Gain is an Automotive News Europe correspondent in France
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Faced with steep sales declines in its home market and in Europe as a whole, Renault has taken a more aggressive stance with unions as it tries to boost the competitiveness of its French factories.

There are signs that the company may even dare the previously unthinkable: Closing unproductive car plants in France, a move that would annoy and embarrass France's Socialist government, which has a 15 percent stake in Renault.

Publicly, Renault denies union claims that it is considering shuttering up to two domestic plants, including its biggest French factory in Flins, near Paris, where the Clio subcompact is built. But the French business newspaper La Tribune reported on Tuesday that it has seen an internal document sent to unions that says plant closings are "unavoidable" unless workers agree on concessions such as a longer work week and a pay freeze.

Renault has shifted much of its production outside of France, to countries such as Spain, which Renault CEO Carlos Ghosn said serves as a model of labor flexibility for French workers. Renault also builds 70 percent of its new Clio for European markets in Turkey. Renault now produces just 17.5 percent of its cars in France, according to La Tribune.

Meanwhile, the French government has softened its tone against the possibility that Renault may shutter plants in France. After saying that Renault would cross a line if the company closed plants in France, Industry Minister Arnaud Montebourg ratcheted down his rhetoric on Tuesday by merely saying that Renault should not negotiate labor contracts by making threats.

The government has conceded that it French labor laws are among the most inflexible in the EU and that wages are significantly higher than many other EU countries. It plans to propose measures to the French senate to address what it says are major structural problems in France's labor policies.

The government, despite publicly criticizing the move, has also done little to prevent PSA/Peugeot-Citroen from eliminating 8,000 job cuts and closing its Citroen C3 factory at Aulnay near Paris.

But whether Renault does carry out its threats to close production sites in France or not, little attention has been paid to the fact that France would likely not even have a car industry if it were not for government subsidies and loans in the past. French government aid will likely continue, but that support will likely no longer be contingent on keeping workers employed on French soil.

You can reach Bruce Gain at bgain@crain.com.

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