French Government Kicks in Loans to Renault, Peugeot

It’s interesting to note the contrast between government bailouts for the auto industry in United States versus other governments, especially in Europe.

The French government, for instance, on Feb. 9 approved about $8.4 billion worth of loans to Peugeot and Renault. French government aid is reportedly tied to using the money to preserve production and jobs in France. According to Bloomberg, that is already causing other European governments to complain of protectionism.

That’s in sharp contrast to U.S. government loans to Chrysler and GM. In order to keep the loans they already have and to get more, the U.S. automakers are required to demonstrate “long-term viability.” In turn, “viability” has become nearly synonymous with cutting production and jobs, and reducing labor costs.

Just today, GM announced it will cut about 10,000 additional white-collar jobs, on top of earlier cuts in both blue-collar and white-collar jobs. Chrysler and GM are due to submit business plans to the U.S. Treasury Department by next week, in order to keep loans they have already received, and to pave the way to receive additional support.

Meanwhile, the global picture keeps getting worse for the rest of the auto industry, including Japan. Nissan, for instance, just announced it expects a big loss for the fiscal year ended March 31. Toyota also announced in December its first operating loss in the postwar era.

Historically, the Japanese government has a reputation for supporting the Japanese auto industry behind the scenes. Can Japan be far behind, while governments in Europe and North America work to support their car companies?

Nissan’s French partner, Renault, on Feb 9 received word it will get a $3.9 billion government loan. The company said the French government also doubled the size of a loan for Renault’s captive finance company, to about $1.3 billion.

“We are very pleased with the loan granted to us by the French government,” said Carlos Ghosn, who is president of Renault as well as president and CEO of Nissan.

“In light of the exceptional crisis impacting our entire industry, access to credit was indispensable for supporting our activity and that of the automotive industry. It will also enable us to pursue our developments and investments in sustainable mobility,” Ghosn said.