Renault will use Turkey, not France, as main Clio production base, union claims

RENNES, France -- Renault declined to comment on trade union claims that Turkey will become the main production site for its new Clio subcompact car in a move to cut costs.

Renault plans to build more than 70 percent of its fourth-generation Clio models in Turkey, union sources told Reuters. The shift that could inflame tensions with workers and the government, its biggest shareholder.

The outgoing Clio was built in Flins, France, Valladolid, Spain, and Bursa, Turkey. A Renault spokeswoman said Flins and Bursa will be the production sites for the new models but said it is not possible to predict the volume split between the two sites at this time.

"We are producing the Clio in both factories to be able to balance the volumes," the spokeswoman told Automotive News Europe.

During internal presentations, Renault disclosed plans to source less than 30 percent of the new Clio from France, Reuters reported, citing two union officials who declined to be identified.

Russia exports

Renault will export Clios built in Bursa to Russia and other eastern European markets, Ali Kassai, the automaker's head of minicars and subcompacts, told Automotive News Europe at the Paris auto show. "We will use Bursa to mainly export cars to Russia and to the Euromed region and also to western Europe. Flins will serve mostly western Europe."

Last year, Renault built 147,971 Clio hatchbacks in Flins. Bursa produced 42,426 Clio station wagons and Valladolid built 48,974 Clio hatchbacks, according to company figures.

Ian Fletcher, an analyst for IHS Automotive, said it made sense for Renault to build the majority of Clios in Turkey where costs are less than in France.

In February, Carlos Tavares, Renault's chief operating officer, told the French Senate's economic commission in Paris that a Clio made in France, costs 1,300 euros more than the same car built in Turkey. The executive was seeking to highlight the hurdles Renault faces in competing in Europe against mass-market carmakers with lower labor costs like Hyundai.

Shifting the majority of production of what could be Renault's best-selling model next year is a politically sensitive move. French officials and ministers are outspoken critics against French companies that seek lower-cost production options overseas.

French plants accounted for 42 percent of Renault's overall European deliveries last year. That compares with 64 percent for rival PSA/Peugeot-Citroen, which has angered unions and politicians by announcing 8,000 job cuts and the closure of its factory at Aulnay near Paris.

Ghosn dressing down

Renault's gradual transfer of production to lower-wage economies has already proved to be a sore point in relations with the French state, which owns 15 percent of the automaker.

Renault CEO Carlos Ghosn was summoned for a public dressing-down by former President Nicolas Sarkozy in 2010, after reports first emerged that the Clio could move abroad.

Renault responded at the time with a pledge to maintain production levels in Flins, west of Paris, until output of its Zoe electric cars had ramped up to take the Clio's place. But the shift to Turkey is going ahead, union sources said, even as Zoe manufacturing volumes remain an unknown. Zoe deliveries are not due to start until early next year.

"There's no visibility on how many Zoes they're going to produce and it's unclear who's buying them at this stage," London-based UBS analyst Philippe Houchois said. "They're obviously under pressure and may have to decide whether to build more (Clios) in France to keep the peace with the government."

Reuters contributed to this report