Wednesday, February 15, 2012

PSA Peugeot-Citroen and Renault Say They're Too Thin on Profits by Making Cars in France

In a move that reminds us a lot of what Fiat-Chrysler CEO, Sergio Marchionne told the Italian government not too long ago, both Renault and PSA Peugeot-Citroen executives told French parliamentary officials in separate appearances before the Senate that they can't make a profit from building cars in France.

According to a report from Autonews Europe, the Renault Group was represented by chief operating officer Carlos Tavares, while PSA Peugeot-Citroen sent Denis Martin, executive vice president for industrial operations. Both automakers confirmed the comments.

Tavares told the French commissions that one of Renault's most popular models, the Clio, costs €1,300 (US$1,700) more to produce at the firm's Flins plant in France than in the company's factory in Bursa, Turkey.

The Renault official said that the discrepancy is even more noticeable now because of the price war in the small car segments, adding that the company remains profitable only because of its well-performing Dacia brand, which is based in Romania.

Martin's remarks were in the same line with the PSA official saying that the subcompact segment is unprofitable for the company in Western Europe and especially France, as the differences in manufacturing costs with other countries is "insurmountable".

Georges Dieng, a representative of Natixis Equity Research in Paris, told Autonews Europe that the French government is asking the two companies to "demonstrate economic patriotism". However, he added that French officials are not taking into consideration the fact that they have to remain competitive.

“French carmakers are not asking for a new round of financial help,” said Dieng, “but the freedom to properly restructure their domestic manufacturing footprint in order to maintain long-term viability.”




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