PARIS - Renault and PSA have quietly entered a new age. They are no longer quirky French companies. They have joined the international auto industry.
This may put them at odds with an increasingly tumultuous France. A political storm is gathering as the socialist government tries to confront growing unemployment, the loss of autonomy under European monetary union and the 30th anniversary of the 1968 May Day student strike.
The French industry whizzed past two new milestones last month on its journey into global business.
Jean-Martin Folz, chairman of PSA/Peugeot-Citroen, announced his reorganization scheme. Louis Schweitzer, chairman of Renault, held a simultaneous international press conference to introduce the new Clio supermini.
The events mark the distance each company has traveled from its past. In their own ways, they have forsaken, step-by-step, a corporate dependency on industrial protectionism at home and a benign neglect of international markets.
'The two French carmakers now target first their (corporate) performance, whatever the means to reach it,' said Renaud de Barbuat, vice president with the consultancy firm AT Kearney in Paris. 'In this respect, they are adopting the rules used by other main carmakers. They are becoming more 1/8anglo-saxon'-minded.'
Moreover, said de Barbuat, top managers at both companies think globalization is now the key issue for their companies.
On 30 December 1997, Renault signed an agreement with the city of Moscow to produce Meganes in the Moskvich plant, beginning in 1998. Last October, PSA said that by 2000 it would open a 100,000-unit plant in Brazil near Rio de Janeiro to make two Citroen and Peugeot models.
The moves into global markets were small events compared to the three changes that significantly reshaped the industry:
Schweitzer closed Renault's Vilvoorde plant in Belgium.
Folz succeeded Jacques Calvet at PSA.
Toyota chose France to set up its second European plant.
By closing its Vilvoorde, Belgium, plant, Renault proved that its cost-cutting program would suffer no delay and that reducing overcapacity meant tough decisions.
The shutdown was announced late last February, just before the new socialist government was elected. Renault Chairman Louis Schweitzer, himself a former top civil servant with socialist governments in the early 1980s, had to resist political pressure in France and Belgium to postpone the closure.
'Everyone realized that the umbilical cord with the French state has been severed and that the company cannot escape market constraints,' said Schweitzer in an interview with Automotive News Europe last November. 'The shock has been very positive.'
As a result, after a FF5 billion ($1 billion) loss in 1996, Renault is expected to go back into the black in 1997, with a slightly positive operating profit in the car division. Early in January, Schweitzer announced in the daily newspaper La Tribune that the cost reduction target of an average FF3,000 per car had been passed and would actually reach FF3,850 ($640).
At PSA/Peugeot-Citroen, Jacques Calvet's departure last October after 13 years as chairman was meaningful.
Calvet fought for years against Japanese and Korean imports, European Union bureaucracy and exhaust regulations. His autocratic style of management was undoubtedly necessary to achieve the merger of Peugeot and Citroen, but it also led to a lack of product innovation and weak international efforts, even in Europe.
Folz, still a discrete man, is new both at PSA and in the car industry. He is considered a pragmatic, open-minded, teamwork supporter. He can also act quickly. Since he took charge at PSA on 1 October, he has pulled Peugeot out of China and India, and merged seatmaker Bertrand Faure into Ecia, PSA's parts subsidiary.
As Calvet was leaving PSA, Toyota was entering the French fortress. It is a significant coincidence.
On 8 December, Toyota Chairman Hiroshi Okuda was welcomed to Paris by the French government as if he were a head of state.
The leading Japanese carmaker had just chosen Valenciennes, in northern France, to set up its second European plant.
Due to start production in 2001, it will initially build 100,000 units of a supermini model. It will compete directly with Renault's Clio, Citroen's Saxo and Peugeot's 207.
Toyota's arrival in Valenciennes is a kind of revolution for PSA and Renault, although they both tried to minimize it.
'I don't think the country they will choose will make much difference in terms of market share,' said Schweitzer.
He is bold in the face of what could be real competition. The French makers depend on their superminis. In 1996, 44 percent of registrations in France were minis and superminis. This rate has been regularly above 40 percent in the 1990s, except in 1993 and 1997.
But the bold public face and an internal determination to cut costs and compete with the Japanese are different reactions than in the past.
'When Peugeot bought Chry-sler's operations in Europe in the late 1970s,' recalls an insider at PSA, 'one of the reasons was to prevent other foreign carmakers from setting up in France.'
The companies had to change to survive. They were losing domination over the French market despite Calvet's tirades and nationalism.
Two years ago, the French still had about 60 percent of their home market. In 1996 and 1997, the figure has dropped to 56 percent. With Toyota coming to France, the share held by PSA and Renault is expected to fall to 50 percent.
The French state, which still owns 45 percent of Renault's capital, will certainly dispose of it. With share prices now around FF170-175, France's stake is worth about FF18 billion ($3 billion).
'I think the French state is likely to sell its stake in Renault progressively, as it did for the oil company Elf,' said Francois Colli, an analyst with Paribas in London.
Such a withdrawal will help Renault cope with another problem, which it shares with PSA: each needs to find new and joint ventures with international carmakers in order to balance their relatively small global size.
State ownership of Renault certainly played a part in the failure of the merger with Volvo in 1993. It also fed Calvet's wrath, as France subsidized Renault until its partial privatization in September 1994. Calvet's resentment also explains why there is so little cooperation between the two French groups.
Top managers have now made growth an obsession.
Folz already said he wants PSA to push sales, beginning with France and Germany. Carlos Ghosn, Renault's No. 2, says growth is critical for Renault's recovery and future. 'Growth must be a deep motivation, not just a formal speech,' he said a few months ago.
The companies show every sign that they have changed.
'Just one year ago, the French car industry showed an image of decline. We can see now the first signs of reconquest,' said AT Kearney's de Barbuat. 'For the past five years, the carmakers have spent a lot of money to improve their product quality.
'Efforts are beginning to pay off.'