Shake-up at Renault: French Socialists stress profits

Burdened with huge losses, the French auto giant Renault accepted the resignation Tuesday of its chief driver, Bernard Hanon. In America, replacement of the head of an auto company makes a good personality story. In France, it marks national economic policy.

State-owned since the end of World War II, Renault long had a reputation for solid engineering, consistent profits, and model labor relations. When Socialists came to power in 1981 and launched a wide nationalization program, they pointed to Renault as proof that public ownership works.

But times have changed. Led by the recent sale of British Telecom, European governments are embarking on taking state industries private. While the governing French Socialists oppose such denationalizations, they now express fidelity first to competition. By replacing Mr. Hanon, observers say, the government wants to show that even Renault will place profits over social concerns.

This accent on profits squeezed Hanon. The government placed him at the head of Renault in 1981 with an order to use the company to cut unemployment. As late as 1982, Hanon was forced to hire 3,500 workers despite growing losses. During the past two years, the balance sheet deteriorated further. The company fell from Europe's largest-selling automaker to No. 6, and last year losses reached more than $1 billion. But the government was reluctant to let Hanon lay off any of the 98,000 workers because of threats from Communist-affiliated Conf'ed'eration G'en'erale du Travail (CGT).

Industry Minister Edith Cresson recently criticized Renault's management while praising Peugeot, the private French auto group. Despite a bitter battle with the unions, Peugeot succeeded last year in laying off some 12,000 workers, and officials say performance for '84 will prove much better than that in previous years.

Last week, President Franois Mitterrand announced during a televised broadcast that measures would be taken ``in the coming days to resolve the grave problems at Renault.'' The government's choice to replace Hanon was Georges Besse, head of Pechiney SA, the state-owned metals group. By cutting staff and closing plants, Mr. Besse turned Pechiney's 1982 loss of more about $333 million to an estimated profit last year of $55 million.

The one area of Renault working better than expected is its heavy investment in American Motors Corporation. Thanks to the Renault Alliance and Encore models, AMC is turning a comfortable profit. But Besse may find it hard to refocus Renault into better moneymaking areas. The CGT has mounted a campaign against further foreign investments while the group's home base is endangered.

The CGT also warns it will fight large-scale layoffs in France. With legislative elections in '86, the government may not want to risk war with the unions. But the government must blunt opposition charges that its nationalizations have ruined French industries. That means proving state-owned companies are just as competitive as private ones by taking quick action to cut Renault's losses.

About these ads
Sponsored Content by LockerDome

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK