France says auto bail-out not protectionist

12th February 2009, Comments 0 comments

France has fiercely defended its plan to pump almost nine billion euros into its struggling carmakers.

PARIS - EU countries labeled the move protectionist and called a crisis summit.

President Nicolas Sarkozy announced plans to lend PSA Peugeot Citroen and Renault three billion euros (3.9 billion dollars) each on top of other measures in exchange for a promise not to shut French plants or sack French workers.

Speaking in Kuwait City during a tour of Gulf states, Sarkozy said the plan had "nothing to do with protectionism" and that other European governments were welcome to put up funds to keep French plants in their markets.

"One million cars were built elsewhere than in France in three years," Sarkozy told a news conference. "It is my responsibility to keep jobs in France."

Peugeot 3008, photo PSAThe European Commission, which has yet to give the loan its approval, warned on Tuesday that the plan might break European Union laws against protectionism, amid sniping from the Czech Republic, Slovakia and German industry.

The Czech presidency of the European Union has called for a summit at the end of the month to encourage leaders to "say a clear 'no' to protectionism".

France's Prime Minister Francois Fillon heads to Brussels on Thursday to sell the deal to the chairman of the European Commission, Manuel Barroso.

Aides to Finance Minister Christine Lagarde said she would invite her new German counterpart Karl-Theodor zu Guttenberg to Paris to reassure him that the French measures "were not inspired by protectionism."

Minister for European affairs Bruno Le Maire joined the chorus, saying the bailout plan was "not protectionism, it's the defence of our industry and the defence of our jobs."

Le Maire told France Info radio the plan did not break the rules of the EU internal market and added that "if the market had worked as well as it should then it would have provided the liquidity that Peugeot and Renault needed."

Motor manufacturing is a pillar of French industry, directly employing one in 10 members of the workforce, but the sector has been hard hit by the global economic crisis and the collapse of consumer credit.

France's biggest carmaker Peugeot-Citroen said Wednesday it had lost 343 million euros in 2008 - having made 885 million in profit the previous year - and forecast that the European market for new cars would shrink by another 20 percent in 2009.

The firm plans to cut its workforce at European plants by 11,000, mainly through voluntary redundancies, between 6,000 and 7,000 of them in France.

Paris sees Renault and Peugeot as national champions, although they only produce around 40 percent of their vehicles at home, running major plants in Spain, Italy, Romania, Portugal, Slovakia and the Czech Republic.

Renault Clio, photo RenaultJob losses will further anger Prague and Bratislava and the German industrial federation BDI has also said it is "highly alarmed."

In total Sarkozy proposes six billion euros in five-year loans, two billion more for Renault and Peugeot's financial arms, 600 million for suppliers and around 220 million in grants for motorists who replace older cars.

France's plan can only go ahead if the European Commission approves it, and its spokesman on competition issues has already expressed concerns.

"We have certain concerns," Jonathan Todd told reporters on Tuesday. "The commission is going to look very closely at the French plan.

"If there is an additional condition like keeping a production plant in France, that would make the aid illegal," he warned.


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