French auto industry faces moment of truth

Mon Feb 11, 2013 10:36am EST
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By Gilles Guillaume

PARIS (Reuters) - The gravity of the French auto industry's crisis will be underlined this week by weak results at PSA Peugeot Citroen (PEUP.PA: Quote) and Renault (RENA.PA: Quote), boosting pressure on both for tougher cost-cutting moves.

France's mass-market car brands are suffering more than most from Europe's deep car sales slump, punished by their exposure to austerity-hit southern markets.

"After the catastrophe of 2012, the companies will all make caution the order of the day," said Societe Generale auto analyst Philippe Barrier. "But the key to the medium-term outcome is how the industry is going to adapt to the low level of the market and prepare for the future."

Before Peugeot and Renault, which report on Wednesday and Thursday, respectively, tyremaker Michelin (MICP.PA: Quote) and parts maker Faurecia (EPED.PA: Quote) publish results on Tuesday.

Further cost-cutting, even to the point of politically sensitive layoffs, may loom as options for all four French industrial heavyweights as they struggle to adjust to an expected long-term slump in European demand.

Peugeot lost business to the likes of Hyundai (005380.KS: Quote) and Volkswagen (VOWG_p.DE: Quote) last year, while Renault's regional market share also dipped 1.1 percentage points to 8.4 percent, registrations data from Brussels-based industry body ACEA showed.

With productivity a key issue, Renault, which plans to eliminate 8,200 jobs over the next four years through attrition, wants to strike a deal on factory "flexibility" with unions on Tuesday, wrapping up thorny talks which kicked off last autumn.

Renault has promised not to close any French plants if workers accept a salary freeze, longer working hours and measures including compulsory transfers between sites.   Continued...

Peugeot and Citroen logos are seen over the French carmakers' showcases on media day at the Paris Mondial de l'Automobile, September 28, 2012. REUTERS/Christian Hartmann