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Government, Ghosn at Odds on What Renault Owes France

CEO Carlos Ghosn says Renault must be strong and healthy and, therefore, must seek growth in international markets.

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PARIS – France, Renault SA’s biggest shareholder, is not happy with the way CEO Carlos Ghosn is moving manufacturing out of the country.

“I will never accept the de-industrialization of France,” declares French President Nicholas Sarkozy. After all the support the government gives to the industry, he says, “it’s the absolute limit to make cars elsewhere to sell in France.”

Ghosn spoke first at a roundtable at the auto show here last week, knowing what was coming from Sarkozy, because the French president has made no secret of his desire to keep automotive jobs in his country.

Ghosn argues Renault is a French company – it has its technical center in France. But the auto maker must be strong and healthy, he says, and, therefore, must seek growth in international markets.

Renault will make two of its four future electric cars in France, the Zoe ZE and the Kangoo ZE, Ghosn points out.

But Sarkozy also knew Ghosn’s position going into the media roundtable.

He notes that when the economic crisis came, companies that had adopted an international attitude became national again and turned to the country for support. France loaned Renault and PSA Peugeot Citroen each €3 billion ($4.1 billion) during the crisis.

Sarkozy vaunts the nation’s record in supporting the industry.

France eliminated a tax that auto makers said had cost them €250 ($343) per car and paid part of the cost of temporary layoffs during the downturn, amounting to nearly €1 billion ($1.4 billion) of support for the French auto industry.

“You shouldn’t be surprised after that that I ask you where you are building your automobiles,” Sarkozy says.

“There’s not a country in the world that helps its industry so much,” he adds. And yet, “in the past six years, France has become an importer of vehicles, with two of the biggest auto makers.”

PSA makes in France 50% of the cars it sells in France, but Renault makes less than half.

While most of Sarkozy’s comments could apply to the auto industry as a whole, his pointed remarks were aimed at Renault, 15% owned by the French government.

Clashes with Renault are not new. The auto maker was considering or planning to close the plant at Sandouville that made the Laguna, Espace and Vel Satis, as all were selling poorly and the market was moving away from large vehicles. France pressured Renault to give it a new product, a light-utility vehicle.

“Closing Sandouville, I can’t accept that,” Sarkozy says.

One reason Renault sells fewer cars in France than it makes is that small cars have grown substantially in popularity. Because they are less profitable, Renault has moved much production to lower-cost countries.

The A-segment Twingo is made in Slovenia, along with two platform mates: the previous-generation Clio and the Wind convertible. The current Clio is made in Flins, France, as well as Turkey and Spain.

Renault has not decided where it will build the next-generation Clio IV due in 2012, but before the auto show, Sarkozy said he would meet with Ghosn to discuss sourcing plans.

A Sarkozy spokesman says the government would not understand moving production out of France of “a car as symbolic for the French as the Clio,” and Sarkozy told elected officials, “When the State is a stockholder, it is not the right of the State to intervene; it is its duty.”

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