PARIS - France's new Socialist government is expected to resist the emergency restructuring underway at Renault and PSA/Peugeot-Citroen.
The newly elected leaders oppose Renault's plan to close its assembly plant in Vilvoorde, Belgium.
'If the government interferes with Renault's decision, it would be equivalent to a re-nationalization,' said Elie Cohen, an economist at the state research arm CNRS (Centre national de la recherche scientifique).
Both Renault and PSA want to cut employment in France this year. Peugeot plans to cut 2,816 jobs in France, including 1,481 early retirements. Renault wants to cut about the same number.
The early retirements need approval from the government, which is expected to resist.
PSA Chairman Jacques Calvet plans to meet this week with the new Socialist labor minister, Martine Aubry. Calvet and Aubry fought over job cuts five years ago, when Aubry held the same post in the previous Socialist government.
Renault intends to close its Vilvoorde plant 31 July. The government wants Renault to delay any closure and study other ways to reduce capacity. France owns 46 percent of Renault and has five representatives on the 14-member board.
The Renault board is scheduled to meet on 10 June, before the annual shareholder meeting.
Lionel Jospin, France's new Socialist Prime Minister, has said the state representatives on the board would 'demand that other measures than closure be considered, studied and prepared to solve the difficulties at Vilvoorde.'
Renault proposed three scenarios to unions at a 3 June meeting of Renault's European works council:
A 40 percent cut in wages or staff at Vilvoorde
A 10 percent cut in work time at French plants and a 9 percent reduction in Belgium
A 13 percent wage cut and a 10 percent reduction in work time at all Renault plants in France, Belgium and Spain.
These scenarios target an annual cost reduction of FF850 million ($146 million), the amount Renault expects to save by closing Vilvoorde. Renault considers the alternatives unrealistic.
The unions say the company can save up to FF5 billion over five years by cutting weekly working time to 32 hours from 39 hours. The new government favors a shorter work week.
Renault lost FF5.2 billion ($896 million) in 1996 and PSA profits fell sharply. Both companies have lost market share in France.