French automakers trying to steer out of a skid

By , Special to The Christian Science Monitor

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.

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.''

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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.

Meanwhile, trouble was brewing inside as well as outside the board room. The architect of the Talbot takeover, smooth, suave chairman Jean-Paul Parayre, came under fire from disgruntled board members, who wanted to replace him with Jacques Calvet, the tough-minded boss who had engineered the Citroen and Talbot layoffs. A bitter public spat followed, and just over a week ago Mr. Calvet was named to replace Mr. Parayre.

Under Calvet, Peugeot can be expected to pursue its stringent cost-cutting policy, including large layoffs.

Renault needs the same treatment. The state-owned company's problems have been similar to Peugeot's, if only recently somewhat less dramatic. It has being dragged down by the loss-ridden truck subsidiary acquired from Citroen in 1977. A delay in bringing out a successor to its popular but aging mini R-5 (once sold in the United States as LeCar) and strikes last year at two of its big Paris plants also hurt.

Moreover, the company has not yet engaged in large layoffs, and the day of reckoning has arrived. Company spokesman Jean-Pierre Mercier says at least 15, 000 firings will be announced in the coming weeks.

''There may have to be even more,'' Mr. Mercier said. ''There's no doubt about it: This is going to be a black year.''

Is there a light ahead for either Peugeot or Renault amid this gloom? Perhaps. Unlike steel, automobiles are not a dying industry, and both French companies have some pluses to count on. Because of their acquisitions, they now have complete model ranges. They also have invested large sums modernizing in recent years, and new models are coming out which they hope will turn their fortunes around. For example, this past week Renault launched a redone version of the R-5. Spokesman Mercier hopes sales will reach 50,000 this year, and get a boost next year as the French economy picks up.

Exports may rise, too. Renault has been notably successful with the launching of its Alliance and Encore models through its US partner, American Motors, of which it owns 46 percent.

''Without our American (Motors) sales, our situation would be much more difficult,'' says Mercier. ''We expect American to become even more important in future years.''

And, in this country where it has traditionally been hard to fire workers, the companies are optimistic about trimming down without too much difficulty. The Socialist government is giving them firm support, and the unions are weak and divided, unable so far to mount a concerted strike offensive.

''I've been a bit surprised by how both the government and the workers seem to understand,'' says Peugeot's Christian Fabry. ''Before, the Socialists didn't understand that changes had to be made in the industry if we were to survive. And I thought the workers would make more problems.''

Still, the light will not shine soon. Officials at both Renault and Peugeot don't expect to see a profit until at least 1986 - if then. ''We used to say 1986 for sure,'' says Peugeot's Mr. Fabry. ''But the way things are going it's difficult to give a date. Let's just say we won't go bankrupt.''

United States factories used 82.6 percent of their capacity in August, the Federal Reserve reported Monday. The lack of change from the previous month is seen by some economists as further evidence of an economy growing at a slower, more stable pace.

Capacity usage has been rising consistently, except for another plateau in November 1983, since the recessionary bottom in November of '82.

When capacity usage increases or decreases, industries must decide such things as whether to:

* Invest more in plant and equipment.

* Hire or lay off workers.

* Raise or lower prices.

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