French Auto Sector Faces ‘Storm’ In 2012

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It is one of the key engines of the French economy and a historically vital industry, but France’s auto sector is heading into 2012 amid dire forecasts for its future and warnings of major job losses. Accounting – directly or indirectly – for a quarter of the national workforce, vehicle manufacturing is one of the gems of French industry and the country is home to two global auto giants, PSA Peugeot Citroen and Renault.

But industry chiefs and analysts are warning that the economic slowdown expected in Europe next year will hit France’s auto industry, which is also suffering from Asian competition, especially hard.

“We are going to be facing a storm (in 2012). The European and French markets will be directed downward,” Renault chief operating officer Carlos Tavares said in an interview with Le Parisien recently. Earlier this month PSA chief Philippe Varin said his company was facing a significant loss in the second half of 2011 and that he expected “negative growth” on the European car market next year.

Though he would not provide details, Renault’s Tavares said the grim forecast meant the group would probably be looking to cut costs early next year. “In the first half of 2012, we will likely be required to take cost-saving measures,” he said.

Last week the group announced it was withdrawing five models from the British market and slashing the number of authorised dealerships by a third after sales there plunged from 113,000 vehicles in 2010 to 87,000 this year.

PSA, for its part, has already announced major French layoffs, including 1,900 job cuts within the company itself and cost-saving measures that will see about 2,300 jobs lost at external partners. In total the company is looking to make 800 million euros (S$1.2 billion) in savings next year.