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Peugeot and Renault to receive federal loans

February 10, 2009|Bloomberg News

PSA Peugeot Citroen and Renault, France's biggest carmakers, will get $7.8 billion in loans from the French government after they promised not to shut plants or fire people in the country.

Peugeot and Renault, which reported slumping sales and thousands of job cuts in the last year, will each get a five-year loan of 3 billion euros at an interest rate of as high as 6%, French President Nicolas Sarkozy said after talks with auto manufacturers in Paris on Monday. Renault Trucks, which is owned by Volvo of Sweden, and some other automakers will also receive 500 million euros in loans, he said.

"Renault and PSA committed not to close any production sites for the duration of their loan," Sarkozy said. "It's a commitment I applaud because it won't destroy our industrial base and know-how in this acute but temporary crisis."

The government is trying to stem labor and industrial unrest in the domestic automotive industry and cap rising unemployment as a result of the global economic slowdown. The measures are in addition to a 26-billion euro stimulus package Sarkozy announced in December as Europe's second-largest economy entered its first recession in 16 years in the first quarter.

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