Paris - French President Nicolas Sarkozy said Monday that his government is lending France's two large auto makers, Renault and PSA Peugeot Citroen, 6 billion euros (8.16 billion dollars) to see them through the economic crisis. In exchange for the aid, the two companies committed themselves "not to shut any factories for the duration of the loan and to do everything to prevent redundancies," Sarkozy said after meeting with auto industry leaders.
Renault and Peugeot are each to receive 3 billion euros over five years, at an interest rate of 6 per cent, which is less than half of what banks would have charged.
In addition, the car makers are urged to use the money to "invest massively ... in order to develop vehicles with low CO2 emission," Sarkozy said. "To improve the combustion engine first, then to develop rechargeable electric motors."
The announcement of the aid came several days ahead of the publication of the last year's results for the two car makers, and after several weeks of intense negotiations.
According to the daily Le Figaro, the head of PSA Peugeot Citroen, Christian Streiff, had resisted the demands by President Nicolas Sarkozy not to outsource production to low-wage countries.
However, his company has been severely hit by the economic crisis, with losses in the second half of 2008 estimated at 2.6 billion euros.
Renault's situation is even more dire, with Credit Suisse estimating that the company's debt will rise from 3.5 billion euros in the first half of 2008 to 5.4 billion euros at the end of the year.
In addition, Renault's Japanese partner Nissan on Monday estimated it would incur an operating loss of 180 billion yen (1.96 billion dollars) for fiscal 2008, which would be the first operating loss for Nissan in 14 years and the first loss since the partnership with Renault was formed in 1999.
