Bloomberg News

Peugeot Holds Minister Meeting With Renault on Car Plans

July 20, 2012

French Industry Minister Arnaud Montebourg is meeting French carmaking leaders to discuss emergency measures for the industry as PSA Peugeot Citroen (UG)’s moves to shut a plant clash with state efforts to preserve jobs.

Peugeot Executive Vice President Frederic Saint-Geours, who is in charge of brands, and Renault SA (RNO) Chief Operating Officer Carlos Tavares are among managers from the companies taking part in the meeting, the manufacturers said.

A prolonged contraction in Europe’s car market prompted Peugeot, the region’s second-biggest automaker, to lay out plans July 12 to shut its factory in the Paris suburb of Aulnay in two years and slash 14,000 jobs. French President Francois Hollande has called the move “unacceptable” and plans on July 25 to outline a program for the helping the car industry.

“There’s been a complete lack of confidence and dialog” between Peugeot and French politicians, Daniel Goldberg, the Socialist Party parliamentarian who represents Aulnay, said in an interview yesterday in Paris. “We, the elected officials, and the unions, want to be responsible, and we understand economic reality, but we’ve completely lost confidence.”

Peugeot fell as much as 1.7 percent to 6.46 euros and was trading down 1.3 percent at 1:10 p.m. in Paris. Renault gained 0.3 percent to 34.63 euros.

Ghosn’s View

Renault Chief Executive Officer Carlos Ghosn said in April that governments in Europe need to allow carmakers to reorganize and reduce their workforces to prevent the industry from weakening. The company, based in the Paris suburb of Boulogne- Billancourt, estimated July 11 that Europe’s car market may not recover to the levels of its 2007 peak until 2018. The French state owns 15 percent of Renault.

The program that Hollande will lay out July 25 may “first target small suppliers, because they are those that suffer the most from their exposure to French manufacturers,” said Xavier Caroen, an analyst at Kepler Capital Markets with a hold recommendation on both Peugeot and Renault. “Renault has no interest in asking for aid from the state, as it should maintain its operational margins this year.”

Montebourg is scheduled to meet separately today with Thierry Peugeot, chairman of the supervisory board at Paris- based Peugeot, to discuss the plans for the Aulnay site. The minister met CEO Philippe Varin late yesterday, two days after convening with the carmaker’s main union representatives.

European Decline

First-half car sales in Europe dropped 14 percent from a year earlier at Peugeot and 17 percent at Renault, the region’s auto-industry trade group, ACEA, said July 12. The two carmakers lost about 1.5 percentage points of market share in their home country in the period, while the share of German competitor Volkswagen AG (VOW) rose to 13.5 percent from 11.9 percent a year earlier, according to the French automakers association, CCFA.

Varin said on July 12 that Peugeot’s factories were running at 76 percent of capacity in Europe and that it has been burning about 200 million euros ($245 million) in operating cash flow a month in the past year.

Montebourg said before his talks with Varin that he’s skeptical about family-controlled Peugeot’s business plans, including a model-development alliance with Detroit-based General Motors Co. (GM:US) that resulted in the sale of a stake to the U.S company.

“We have a true problem with their strategy for Peugeot, the alliance with General Motors, the behavior of the shareholder,” Montebourg said on France Inter radio station yesterday.

‘Dangerous Situation’

Thierry Peugeot said in an interview published by Le Figaro newspaper today that government criticism of the company’s planned job cuts has put the group in “a dangerous situation.” Asked about the possibility of a takeover bid for the company, the chairman said that “anything is possible. that’s why we need to take action.”

Goldberg, the parliamentarian for Aulnay, said the French state has sought to support the factory since its creation in 1973, providing cheap land, infrastructure and tax breaks, in addition to loans provided by Nicolas Sarkozy’s government following the recession of 2008 and 2009.

Peugeot executives refused at a meeting with Montebourg on June 18, the day after France’s legislative elections, to answer questions about plans for the Aulnay site, said Goldberg, who was part of a delegation attending those talks.

A spokesman for Peugeot, Pierre-Olivier Salmon, declined to comment on Goldberg’s remarks.

Failure by Peugeot to regain the trust of elected officials means the company risks losing financial support for job cuts and retraining, and may even face challenges in terms of land use from the local government.

“We’ve already lost one year in which the company refused to discuss matters,” Goldberg said. If the company doesn’t restore politicians’ confidence, “then we won’t be cooperative. We’ll be very demanding and put in place an opposition that is very strong.”

To contact the reporters on this story: Mathieu Rosemain in Paris at mrosemain@bloomberg.net; Mark Deen in Paris at markdeen@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net; James Hertling at jhertling@bloomberg.net


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