The automobile industry and the economic crisis: the French example and the European fear of protectionism

Article published on March 9, 2009
Article published on March 9, 2009

If the current media inflamed economic crisis that we are going through is felt in many domains, the automobile industry finds itself particularly concerned. Even more affected than during the previous crisis of 1992. For over a year now the industry is facing a very steep fall in demand. This is a small survey of the difficulties and the measures taken by France and Europe faced with so many troubles. During a recent economic conference in Saudi Arabia, the president of the group Renault-Nissan, Carlos Ghosn, estimated that the 2009 car sales in the world market would reach approximately 55 million vehicles, against 63 million in 2008 and 69 million in 2007. He also said that the industry would have to wait until, at least 2016 before the 2007 figures could be matched again. (Le Monde, January 27, 2009. Such estimations should always be considered delicately since no one can say for certain how long the economic difficulties in which the whole world is in today will last. However, they are a good way of estimating the height of the challenges that we are facing enabling the maintenance of the highest level of competitiveness in this sector. Obviously the states do not intend to remain arms crossed in front of this crisis and various measures are being taken. There is the American recovery plan to revive the automobile sector with billions of dollars to come in aide of the big companies Chrysler and General Motors. But, the United States are not the only ones in this case. Indeed, the French president Nicholas Sarkozy announced a plan to grant financial aide amounting to 7.8 billion Euros over five years for both Renault and PSA Peugeot-Citroën. If in Europe every member state is free to use the public moneys to help its industry, the problem that arises from this announcement is the conditions imposed on both companies being helped. The main and the most debated clause obliges both groups not to delocalize during the duration of the loan and to procure parts solely from French manufacturers. A general outcry form several European neighbours was then heard. To begin with, the Czech Republic, the current rotating president of the Union, directly identified by Nicolas Sarkozy in his broadcast speech last February 5 as the favoured destination of the French automobile relocation because of its cheaper workforce. But, the Czechs are not the only ones to worry. The European commissioner in charge of the competition, Neelle Kroes warned the French Secretary of State for Consumer affairs and Industry, Luc Chatel, of a possible “risk of returning to a state of protectionism“ (Le Monde, February 6). She added that to force companies to invest or buy only in France is not compatible with the European Law (Le Figaro, February 11). France has made up its mind to apply its plan and denies any form of protectionism. The government has even sent its minister in charge of the implementation of the Recovery Plan, Patrick Devedjan and its Secretary of State in charge of European Affairs, Bruno Le Maire on a European tour at the end of February to explain and convince various European leaders. Particularly in Germany, which is very reluctant to accept that the French recovery plan does not go against the rules of the EU. Finally, France has made a commitment in front of the Commission to minimise the number of conditions on paper to the loan granted to the car manufacturers that does not put into question “the moral commitment” of these two towards the State (Le Figaro, February 25). In the end, after the French inflection, the European Commission, judging the threats of protectionism to be cleared up, eventually agreed to the automobile plan. An agreement, confirmed by the Czech Prime Minister Mirek Topolanek as well during the European summit on crisis that he summoned on March 1. What remains to be seen is whether this recovery plan, coupled with the previously adopted policy of reducing premiums to boost car purchases, will be effective in re-energizing the activity of the French automobile sector and whether or not it will be imitated.

A Sector in Crisis

What measures?

European Fears

The French Response

Matthieu Mollicone Translation by Joanna Cordero