UPDATE: Renault CEO Says Credit Is Hub Of Auto Industry Woes
Thursday December 4th, 2008 / 18h14
(Adds details, background, more CEO remarks) By David Pearson Of DOW JONES NEWSWIRES PARIS -(Dow Jones)- The rarity and high cost of credit is the main problem facing the global automotive industry, and governments must act to ensure that financing is made more available and more cheaply, the head of French auto maker Renault SA (13190.FR) said Thursday. Chief Executive Carlos Ghosn told a group of French journalists that the crisis facing the industry is likely to be protracted. "It's not going to disappear after three months or six months," he said. Speaking after French President Nicolas Sarkozy unveiled a battery of measures aimed at stimulating car sales in France, providing financial assistance to cash-strapped suppliers and easing the credit squeeze that is holding back the in-house financing arms of Renault and local rival PSA Peugeot-Citroen (13190.FR), Ghosn said the aid package "goes in the right direction." Without these measures, he said, the French auto market would have fallen by 15% next year. The contraction is now likely to be limited to 5%, he added. Ghosn said Renault has no near-term plans for additional production cuts beyond those already decided through the end of the year. "But if our markets continue to shrink, we will have to the cut back production some more," he added. Renault has announced it will slash production by 25% in the last quarter of this year, and is reducing its European workforce by 6,000. One of the main measures announced by the government was to make more generous the terms of an existing scheme that encourages car owners to scrap old vehicles and buy new ones that are less fuel-thirsty and emit less carbon dioxide. The idea is to help car makers absorb bloated and costly inventories of unsold vehicles, while improving the carbon footprint of the French car fleet. Ghosn said Renault will sweeten the terms of the French government's scheme by offering a EUR1,000 bonus to owners of cars that are more than eight years old, and will offer it to buyers of young, clean-burning second-hand Renault cars. The European automobile market is estimated to have shrunk by 25% in November, and Ghosn said the outlook for 2009 is that the market "will be at best as good as the last three months, that is to say, a very sharp drop." Under these conditions, he said, "unemployment will continue. You can't operate your plants normally when your main market has collapsed by 25%." Ghosn added the situation is just as dire in Japan and the U.S. "We must at all costs decouple the problem of financing from that of the recession. If we remain in a situation in which they feed on each other, it could be much more severe than what we're seeing today and become really dramatic," Ghosn said. "The depth and duration of the crisis will depend on the amount of support that governments provide to sustain industrial activity," he said. He noted that, today, a large automotive manufacturer would have to pay annual interest of 8% and 9% for a three or four-year credit in euros. "These are excessive rates for an activity like ours. That can't go on," he said. Renault shares closed up 1.7% at EUR18.04. Company web site: www.renault.com -By David Pearson, Dow Jones Newswires; +331 4017 1740, david.pearson@dowjones.com Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=G8rN%2BJs%2FXaaSgxy4%2FPCYtg%3D%3D. You can use this link on the day this article is published and the following day.
