France to loan 6 billion euros to two carmakers

PARIS. February 10. KAZINFORM French President Nicolas Sarkozy is set to meet the bosses of French automakers Renault SA and PSA Peugeot-Citroen on Monday after reports he plans to announce a bailout plan including 6 billion euros ($7.7 billion) in loans.

Les Echos and Le Figaro newspapers say the loans will last five years and include conditions such as a halt to layoffs over the course of the loan and a suspension of factory closures in France over the period. Renault and Peugeot-Citroen would share the 6 billion euros equally. Measures for auto parts suppliers are also expected. In Paris midday trading, Peugeot-Citroen shares gained 5.7 percent to 15.45 euro and Renault shares were up 3 percent at 17.13 euro. Peugeot-Citroen reports its 2008 results Wednesday followed by Renault on Thursday. Le Figaro said without extra help, both auto makers could see their credit rating downgraded if results are weak. Sarkozy's office would not confirm the figure cited in the reports, which is at the top end of the 5-6 billion euros aid bracket cited by Prime Minister Francois Fillon at a car summit last month in Paris. A statement released by Sarkozy's office said only that auto bosses were expected at the Elysee palace Monday afternoon "to discuss measures of support to combat the crisis." The interest rates were to be between 6 percent and 7 percent for the loans, compared to commercial bank rates of 11-12 percent, Le Figaro said. The money would come on top of 1.3 billion euros the government has already given to the French auto industry. Sarkozy is insisting auto makers agree to no factory closures as a condition for any future aid, the reports said. Le Figaro said Peugeot-Citroen CEO Christian Streiff has agreed to this condition, after initial resistance. At the Jan. 20 car summit, he said it would be "impossible" to give such guarantees. Peugeot-Citroen spokesman Laurent Cicolella declined to comment Monday. Renault, which is 15 percent owned by the government, has agreed to no factory closures. EU Competition Commissioner Neelie Kroes, who will need to approve the aid, warned last week against a "Buy France" clause. She said France would break EU laws if it demanded that carmakers buy only French car parts or invest only in France in return for government aid. Prime Minister Mirek Topolanek of the Czech Republic, which holds the EU presidency and whose country is home to production for French automakers, said in a statement last week that he has "serious doubts about political involvement in the management of commercial companies and breach of the rules of free competition." Car manufacturers are pleading for billions in soft loans and government handouts to survive slumping sales and help them build greener cars that meet stricter environmental standards. Automakers face three key challenges: In uncertain economic times consumers are shying away from big-ticket purchases; the industry was burdened with overproduction already before the crisis; and car producers are finding it hard to get financing amid a credit crunch. In France, an index of manufacturing confidence rose in January after government promises of more aid boosted automotive industry production. The auto industry provides jobs for around 10 percent of the French work force; Kazinform cites Today's Zaman.