SEMINAR: France at 20% capacity untenable

just-auto SEMINAR: France cannot continue running plants at 20% capacity: LMC

By Simon Warburton | 15 November 2012

France will have to use radical surgery to address its current chronic overcapacity as the European automotive crisis spreads across mature markets, said one industry analyst.

As nervous unions eye French automakers' plans to overhaul its bloated capacity issues, a stark warning came from industry analysts that far more wide-reaching measures need to be taken.

“You can't carry on running plants in France at 20% utilisation,” automotive analysts LMC director of research, Arthur Maher, told today's (15 November) second just-auto Industry Intelligence Seminar in Swindon, England.

“The French government has a 15% stake [in Renault and] something radical has to be done in terms of its massive over capacity. What the French government is trying to do is get Renault maybe to trim capacity in Europe outside France.”

Maher conceded such huge restructuring would be “very stressful” but that Europe was in a critical phase where the twin ogres of plunging demand and a fizzling out of nascent growth has left automakers staring at significant performance problems.

“One third of [Europe] plants are currently running at 20% utilisation [some] at 90%,” said Maher. “Some French plants are running at 15%. In the auto sector, you are in a double dip recession [although] the UK is the exception. Government deficits reduce our ability to stimulate the market.

“A number of car manufacturers are running at barely 60% where really they need to be up above 80% to have their heads above water.”

Maher's caution surrounding France followed an intense period of introspection from both the Paris government and the automakers who have been engaging in a frenetic round of consultations with all their major unions to secure greater productivity in return for some element of future job security.

However, PSA Peugeot Citroen has already announced it will shutter its Aulnay plant and cut up to 8,000 jobs in a bid to address its own problems while, only this week, Renault has offered its unions the carrot of no plant closures but at the price of enormous and controversial restructuring in its French operations.

FRANCE/GERMANY: GM and PSA shelve plans for deeper ties

Sectors: Vehicle manufacturers, Vehicle manufacturing, Vehicle markets

Companies: Renault, PSA, Peugeot, Citroen, GM

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