PSA, Renault say they can't build small cars profitably in France
TURIN – France’s manufacturing costs are so high that a subcompact car costs 1,300 euros more per unit than the same vehicle built in Turkey, a senior Renault executive told a French parliamentary commission.
Carlos Tavares, Renault’s chief operating officer, detailed the nation’s high manufacturing costs in a Feb. 7 hearing in front of the French Senate’s economic commission, according to a report by Natixis Equity Research in Paris.
In a separate appearance before the Senate that same day, Denis Martin, PSA’s executive vice president for industrial operations, said the company’s French assembly plants were uncompetitive, Natixis added. Renault and PSA confirmed the comments.
The two executives said they were struggling to compete with key models like the Peugeot 208 and Renault Clio.
Tavares said that a Clio made at Renault’s plant in Flins, France, costs 1,300 euros more than the same car built in Bursa, Turkey. The cost gap is even more painful at a time when the price war on small cars is escalating in Europe as automakers use margin-eating incentives to maintain sales volumes.
Renault remains profitable only because its Dacia subsidiary has performed well, Tavares said.
Likewise, Martin said the subcompact segment is not profitable for PSA in western Europe, and in France in particular.
The cost gap between French plants and those of low-cost countries is insurmountable, PSA believes.
The two French automakers have been unable to cut costs in part because of government intervention. In 2009, France pledged loans worth 6 billion euros to PSA and Renault in return for guarantees to safeguard jobs and keep factories open. The two automakers repaid those loans last year.
PSA and Renault are being asked to demonstrate economic patriotism, but the government has not recognized their need to remain competitive, Natixis’ Georges Dieng said in a phone interview.
“French carmakers are not asking for a new round of financial help,” he said, “but the freedom to properly restructure their domestic manufacturing footprint in order to maintain long-term viability.”
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