BRAZIL'S WAVERING economy endangers the global aspirations of Renault and PSA/Peugeot-Citroen.
Volkswagen and Fiat will suffer in the short term as sales collapse. VW gets 15 percent of its profits from Brazil; Fiat gets 20 percent.
When the Brazilian government suddenly raised taxes to fight currency speculators, November sales fell 31 percent and plants closed.
To bring themselves into the global car community, Renault and PSA rely on new Brazilian plants.
Now the outlook is dreary, and global automakers plan nine new assembly plants and two engine plants in Brazil in 1998 and 1999, joining 10 already operating.
In London, analyst John Lawson at Salomon Brothers foresees sales falling 20 percent next year. Merrill Lynch analyst Stephen Reitman expects a 17 percent fall.
The analysts expect Brazil to rebound by this time next year, but new plants from Fiat, Renault, Asia Motors and Mitsubishi will be coming on line at the same time.
'It would have been difficult even without this slowdown,' said Reitman. 'There were already concerns about overcapacity.
'The French feel they have to catch up. It's going to be tough for them.'
Renault says it is not worried.
'We will not question our Brazilian investment,' said a Renault spokesman last week.
Georges Dieng, an analyst with Credit Lyonnais Securities in Paris, said, 'Newcomers such as PSA and Renault will just have to monitor their ramp-up.'