French President Nicolas Sarkozy announced on Monday the decision of his government to allocate six billion euros to local car manufacturers, Renault and PSA Peugeot Citroen.
In return, Renault and Peugeot have committed not to close any factories in France and to do everything possible to prevent layoffs, Sarkozy said after a meeting with the leaders of the two companies. Renault and Peugeot will each receive three billion euros over a five-year period, at an interest rate of six percent, half of the usual bank rates. The companies are also required to invest the money in the development of low greenhouse gas emission vehicles, Sarkozy added.
“First, they need to improve internal combustion engines, and then develop electric ones,” emphasized the French president. The allocation of loans followed several weeks of intense negotiations and just a few days before the announcement of the annual results of the two companies. According to the newspaper Le Figaro, the head of PSA Peugeot Citroen, Christian Streiff, resisted President Sarkozy’s demands to commit not to relocate production to poorer countries, stating that it is impossible to promise such a thing. However, this car manufacturer has been severely affected by the economic crisis, with losses estimated at around 2.6 billion euros in the second half of last year.
Renault is in an even worse situation, and according to estimates from Credit Suisse, the company’s debt will rise from 3.5 billion euros at the beginning of 2008 to 5.4 billion euros by the end of the year. Furthermore, Renault’s Japanese partner Nissan announced on Monday that it expects an operating loss of 180 billion yen in fiscal 2008, which would be Nissan’s first operating loss in the last 14 years and the first loss since forming a partnership with Renault in 1999. (Hina)
