French car bosses want labour costs cut as sales slump

France’s two top motor industry bosses predicted a greater than expected drop in demand throughout Europe, including France, on the eve of the world’s biggest car show, Paris’s biennial Mondial de l’automobile. Renault chief Carlos Ghosn and PSA Peugeot Citroën head Philippe Varin called for French labour costs to be cut to face up to the crisis.

Reuters/Philippe Wojazer

At the beginning of the year Renault expected a three per cent reduction in its sales in Europe, Ghosn told Le Figaro newspaper on Thursday, but the economic crisis that has racked the continent means that it now expects them to fall eight per cent, while in Europe it expects a slump of 13 per cent.

• The Mondial de l'automobile is the world's biggest car show;
• It takes place in Paris every two years;
• Until 1988 it was called the Salon de l’automobile de Paris;
• The first car show in Paris took place in 1898.

“Unfortunately, we see no prospect of an improvement next year,” he added. “The market will be stable at best or, more likely, slightly down.”

Speaking to business daily Les Echos, PSA’s Varin predicted that his company’s sales will fall 12 per cent on the home market and eight per cent in Europe.

“There is overcapacity on the European market and it’s going to stay that way,” he said. “We’re working with the hypothesis that it will stay flat over the next three years. In this context it’s obvious that a number of factories must be closed. We’ve decided to do it but a number of other carmakers will also have to carry out similar operations.”

PSA shocked France earlier this year with a declaration that it would shed 8,000 jobs and close its factory at Aulnay-sous-Bois, near Paris, in 2014. It has reached agreement with unions for a wage freeze and “flexibility” in exchange for a promise to keep production at another factory, Sevelnord in the north of the country.

Varin told Les Echos that he hopes to cut costs by five to 10 per cent.

Ghosn also called for flexibility and cheaper labour costs.

Both bosses insisted that the French car industry needs to improvee its "competitivity" called on President François Hollande's Socialist government to reduce employers’ social security contributions.

Trade unions have criticised the companies for chasing the luxury car market, which they say was already saturated.

French unemployment now stands at three million after a wave of redundancies that have put the government on the spot over its industrial policy.