French automakers trying to steer out of a skid
The sure French touch at the steering wheel is slipping. Ever since the pioneering days of Andre Citroen and Louis Renault in the 1890 s, French automakers have been world leaders, producing vehicles known for their daring design, clean comfort, good fuel economy - and profitable sales. But in the past few months the industry has plunged into turmoil. Both Renault and Peugeot, the country's two huge producers, have been beset by declining sales, massive layoffs, labor unrest, and, at Peugeot, even a nasty board-room power struggle.Skip to next paragraph
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The difficult situation has become a major national issue. The auto industry employs nearly one 1 of 10 workers, directly or indirectly, and accounts for nearly a fifth of French exports. As a result, the industry is seen as the key test of the Socialist government's often-repeated desire to ''restructure'' the country's industrial base, modernizing and making it more competitive internationally.
''It's a big test, all right,'' said Marie Madeline Galesson of the Ministry of Industry. ''We now realize that if we are going to have a great automobile industry, it has to go on a diet.''
The industry's problems came to the forefront suddenly. During the 1970s, French auto exports had nearly doubled, with sales reaching more than $5 billion in 1979. Then the oil crisis struck. That blow, combined with rising labor costs and a delay bringing out new models, hit the French particularly hard. By the end of 1982 exports had fallen to less than $1 billion. In West Germany alone, the number of French cars sold slumped by a third.
At home, the news was equally bad. While imports managed to take only about 20 percent of the French market during the 1970s, they have now increased their share to some 30 percent.
The results have been big losses for both Renault and Peugeot, the first big losses for either company since the end of World War II. Renault lost about $ 200 million last year, and officials say this year will be worse. Peugeot's situation is more dramatic: After losses totaling nearly $1 billion over the past four years, it now has debts amounting to $5 billion.
Much of the difficulty, especially at Peugeot, has been structural. Ten years ago, Peugeot was a relatively small family-run producer of sober, reliable cars. Then in an effort to gain the size necessary to compete worldwide, Peugeot gobbled up both Citroen in 1975 and Talbot, Chrysler's European operations, in 1978. All of a sudden Peugeot was Europe's largest automaker.
It soon became apparent that the company had grown too fast. Merging the products proved costly and difficult, and the Socialist government compounded the difficulties after its 1981 victory by freezing prices. The reduction of 55, 000 workers between 1979 and 1982 and the successful launching last year of two long-overdue and successful models, the mini Peugeot 205 and the medium-range Citroen, were not enough to turn the company around.
At the beginning of the year, Peugeot announced that nearly 12,000 layoffs were needed. High drama ensued. Violence first exploded at the Talbot plant in Poissy, and as soon as tempers calmed there, problems broke out in Citroen's Aulnay factory. Nevertheless, after an agonizing delay, the government, which has the final say in firings here, permitted the layoffs to go ahead.