France's Macron Orders Up Billions in Aid for Auto Industry
By Nick Kostov
PARIS -- French President Emmanuel Macron Tuesday said his
government planned to spend billions of euros to prop up France's
auto industry amid a collapse in car purchases caused by the
Most of the package is going to Renault SA in the form of a
state-backed credit facility of EUR5 billion ($5.49 billion).
However, Mr. Macron said the state wouldn't complete the agreement
until the company's management and unions had reached an agreement
over the shape of the car maker's future workforce and sites.
Mr. Macron also unveiled rebates and subsidies to stoke demand
for next-generation vehicles, particularly electric and hybrid
cars. Car owners in France who scrap older vehicles and buy more
fuel-efficient models are eligible to receive EUR5,000 starting on
June 1, Mr. Macron said. The state is also boosting its rebate for
buying an electric vehicle to EUR7,000 from EUR6,000, Mr. Macron
"We need to get our fellow citizens buying more vehicles in the
coming weeks," Mr. Macron said, speaking from a car-parts factory
in northern France.
The French state, Mr. Macron said, was also creating a EUR1
billion fund focused on transforming the auto industry, spurring
consolidation among smaller companies and investing in research and
development. Renault and Peugeot owner PSA Group each planned to
contribute EUR100 million to the fund.
The measures followed weeks of negotiation in which French auto
companies agreed to build more electric and hybrid vehicles in
France and invest in research and development in the country.
Earlier this month, the French state offered Air France-KLM a EUR7
billion loan package in exchange for reducing domestic emissions of
carbon dioxide by 50% by 2024.
Even before the pandemic began, Europe's auto industry was
struggling with weakening global demand and rocketing costs
associated with its transition to electric and hybrid vehicles. Now
car makers are burning through cash. Hardly any new cars were sold
in Europe last month as national lockdowns closed dealerships and
France's move could put pressure on other countries to follow
suit. Germany is expected to unveil measures to help car makers in
the coming days. However, analysts warn that cash-for-clunkers
programs like the one Mr. Macron announced can backfire
economically. Consumers who buy a car using subsidies usually won't
buy another vehicle for several years.
Mr. Macron cast the move as part of his effort to fulfill the
European Union's Green Deal, a package of measures designed to help
the continent's economies transition to cleaner energy and finance
investments to meet the bloc's climate goals.
At times, however, Mr. Macron struck a nationalist tone,
departing from the rhetoric that has made him the standard-bearer
of international cooperation and globalism. Mr. Macron said France
should ensure that car models currently produced in France don't
shift to other countries. Mr. Macron said he wants France to become
the top producer of electric and hybrid cars in Europe, building
more than a million of these vehicles a year by 2025.
For their part, Renault and PSA have said they would increase
their production of electric and hybrid vehicles in France,
according to Mr. Macron. PSA will produce 130,000 more electric or
hybrid vehicles in France by next year. Renault pledged to
quadruple the number of electric vehicles it produces in France by
Renault also vowed to build electric motors at a site in
northern France, and said it would join a venture between French
energy company Total SA and PSA that aims to challenge Asian
dominance in battery production.
Both Renault and PSA are navigating difficult straits. Renault
is expected Friday to outline a restructuring plan, which will
likely include the closure of several small factories, according to
people familiar with the matter. Renault's liquidity reserves have
been falling in recent months as sales have plummeted. It reported
its first loss in a decade in 2019 after a tumultuous year.
PSA, meanwhile, is working to complete a merger with Fiat
Chrysler Automobiles NV by the end of the first quarter next year.
Some analysts have questioned whether the terms of that deal still
make sense given that the coronavirus pandemic has changed the car
market -- and the stock market -- considerably since the companies
signed binding terms for the merger in December. The deal will
require both companies to pay large dividends at a time when their
share prices are under pressure and they are desperate to preserve
The auto industry employs some 400,000 people in France and
accounts for roughly 16% of industrial revenue in that country. In
order to prevent layoffs, the French state has subsidized
paid-leave programs for some 248,500 auto-sector workers after
global lockdowns cratered demand. The state has also guaranteed
almost EUR300 million in loans to car companies.
Write to Nick Kostov at Nick.Kostov@wsj.com
(END) Dow Jones Newswires
May 26, 2020 16:49 ET (20:49 GMT)
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