France to unveil rescue plan for struggling car industry

French President Emmanuel Macron is set to unveil on Tuesday new measures to rescue the country's car industry, which has been hammered by the virus lockdown and the resulting recession.

Macron tweeted that the government’s support for the national car industry, which includes brands like Peugeot-Citroen and Renault as well as parts suppliers, will increase “massively."

“This is a part of our economy, thousands of jobs,” he said.

Macron is meeting with carmakers and unions at the Elysee presidential palace on Tuesday morning. He will then visit supplier Valeo, which makes equipment for electric cars, at its factory in Etaples, in northern France, from where he will detail the rescue plan.

The issue is politically sensitive, since France is proud of its auto industry, which employs 400,000 people in the country and is a big part of its manufacturing sector. The government wants carmakers to develop innovative products in France and keep jobs in the country.

Finance Minister Bruno Le Maire said Monday that carmakers must commit to bringing back manufacturing to France in exchange for the support measures.

The aid is expected to include government subsidies for consumers to buy a battery-powered car as well as other incentives for people to scrap their old car and buy a lower-emissions model.

Auto sales in France fell by about 90% in April compared with a year earlier as showrooms were shut and factories suspended production. The country started easing restrictions since May 11 after two months of strict lockdowns.

The plan to support the industry comes at a crucial time for carmaker Renault, which came into the virus crisis in particularly bad shape.

Le Maire said Monday its survival is at stake and that the government would not require Renault to keep all its French jobs and facilities in exchange for the rescue funds, in order to allow the company to adapt to the economic situation.

Renault's alliance with Nissan and Mitsubishi is a major global auto player but has struggled since the 2018 arrest of its longtime star CEO Carlos Ghosn.

The group reported its first losses in years in 2019, and unions say it could announce sweeping job cuts and factory closures in France after meeting with staff Thursday.

The French government is its single biggest shareholder with a 15% stake, and has been in talks over a 5 billion-euro ($5.5 billion) loan guarantee to help the company survive.

French carmakers won billions in bailout funds after the 2008 financial crisis and benefited from a government bonus plan that encouraged consumers to buy newer cars, though that didn’t prevent thousands of job cuts.

PSA Group, which makes Peugeot and Citroen cars, came into the current crisis in better shape, after years of cost-cutting under CEO Carlos Tavares as the industry grapples with the transition to electric and driver-less vehicles.

PSA reported record profits last year, but has also seen sales plunge amid the virus lockdowns. It is in the process of merging with Fiat Chrysler Automobiles to create the world’s fourth-largest auto maker. The French government owns a 12% stake in PSA through the state investment bank.

Carmakers in other countries are also struggling.

U.S. automakers haven’t received direct government help yet but car dealers and auto suppliers can apply for low-interest loans. Some U.S. some politicians don’t want to bail out carmakers again after they got huge bailouts after the 2008 financial crisis.

Italian-American Fiat Chrysler, which has its corporate headquarters in the Netherlands and its financial base in Britain, confirmed this month a request for an Italian state-backed loan worth 6.3 billion euros ($6.9 billion). The move set off debate in Italy over whether such money should be made available to companies with legal headquarters overseas.