Bailed-Out U.S. Automakers Give Thanks They're Not French

January 18, 2010

Lots of people, including Teamsters Union members and Tea Party protesters, seem to have a beef with last spring's bailout and restructuring of the two bankrupt U.S. automakers, General Motors and Chrysler.

As our colleague Bengt Halvorson notes, the automakers themselves aren't complaining. They're keeping their heads down, sticking to their recovery plans, and focusing on the design and rollout of new and better cars and trucks.

And at the moment, they're also quietly thanking their stars that they're not French.

Carlos Ghosn

Carlos Ghosn

2010 renault clio facelift 005

2010 renault clio facelift 005

Fiat's Sergio Marchionne

Fiat's Sergio Marchionne

French national patrimony?

While U.S. automakers are likely to start hiring production workers again later this year, the French government is telling one carmaker what it must build, and where: Paris wants to force Renault to continue building its Clio subcompact in Flins, France.

The government--which owns 15 percent of Renault--opposed Renault's plan to move Clio production to Bursa, Turkey, in 2013. Wages for French auto workers are second only to Germany's, and far higher than those of U.S. workers (once benefits are netted out).

Renault wants to switch Flins to building electric cars and battery packs, which should be promising for French technology and workers. But the Clio, a major volume car for Renault, has apparently become part of the national patrimony. Now a government representative will take a seat on Renault's strategic committee.

Bow to the "will of the state," monsieur!

Carlos Ghosn, who runs the Renault-Nissan alliance, must be spitting nails after meeting this weekend with French president Nicolas Sarkozy and industry minister Christian Estrosi.

Estrosi's words should send a chill through the heart of even through the most ardent opponent of the U.S. restructuring: "The will of the state ... should be respected in Renault's future choices." Is that a guillotine we see over the horizon?

This contrasts with the Obama Administration's hands-off approach to GM and Chrysler. After replacing boards that clearly failed on oversight and passing tougher CAFE gas-mileage regulations, Washington has refrained from weighing in on model and plant choices.

Day of reckoning to come

Analysts agree meddling in such decisions only postpones the ugly day of reckoning lying ahead for Europe. As Chrysler-Fiat chairman Sergio Marchionne frequently points out, the European industry can build 20 to 30 percent more vehicles than it can sell.

European makers overall--but in particular the French and Italians, who specialize in small, low-margin cars--need to restructure, slash capacity, and reduce costs. Marchionne himself is fighting the Italian government over his closure of a plant in Sicily that hasn't turned a profit in two decades.

His comment on the French interference? He told industry trade journal Automotive News, "The minute we get that kind of interference [from government] is the day we should give up the keys to the car."

Carlos Ghosn in Geneva 3-5-08

Carlos Ghosn in Geneva 3-5-08

U.S. less costly than Europe

The North American industry is now largely done with the government-led restructuring of last year. Some European makers, including Volkswagen and Mercedes-Benz, plan to open or expand plants in the U.S. because U.S.-built cars are now far less costly than those from Europe.

And U.S. carmakers, including GM, Toyota, Ford, and Chrysler, expect to start hiring again this year, as sales volume gradually recovers from the depressed levels of the last year.

Opel plan will tell

A telling sign of whether the European industry can face reality will be the reaction to restructuring plans from the Opel arm of General Motors, to be issued within weeks. Opel is widely expected to propose a 20-percent staff reduction, and close up to four European plants.

If the countries in which Opel operates forbid it to close plants or lay off workers, Europe's industry may stagnate still further. And worker threats to blow up closed plants don't help either.

[Financial Times, Detroit News, Automotive News (subscription required), Automotive News; guillotine drawing from Amnesty International's Flickr account]


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