Renault Confirms Future Production of Clio in France and Turkey

Following discussions that took place on Saturday (16 January) between France's president Nicolas Sarkozy and Renault chief executive officer (CEO) Carlos Ghosn, the French automaker has confirmed that it will manufacture the next Clio in France, as well as Turkey. The meeting occurred to get to the bottom of a report that appeared in the French press during the previous week suggesting that the automaker could be moving the entirety of production of the fourth-generation Clio to Turkey and which caused a political uproar (see France - Turkey: 11 January 2010: Renault Considering Turkey as Next Generation Clio Base; French Minister to Meet Management). A statement from Ghosn released by the company following the meeting confirmed that its Flins (France) facility would be a facility alongside Bursa (Turkey), and that its future alongside that of its employment levels had been guaranteed. However, Renault spokesperson Frédérique Le Grevès told the International Herald Tribune that she could not confirm "the volume or cars nor how long we will produce the Clio 4 in Flins." The plant will also be home to the automaker's new Zoe model, which the statement said is "the core of Renault's Electric Vehicle range, starting in 2012."

After the meeting, the French government confirmed that it has achieved what it had set out to initially. Claude Guéant, Sarkozy's chief of staff, told Europe1 radio, "Renault has done everything that we asked. You can't ask Renault to make cars for Turkey in France, which would mean not selling any more cars in Turkey."

Despite threats that the French government could increase its 15.01% stake in the business before the meeting, Ghosn also confirmed to French newspaper Le Parisien that there has been no discussions with regards to the state increasing this. However, the government will instead receive a representative seat on the strategic committee of the automaker. Industry Minister Christian Estrosi told Reuters, "We have decided that the state as shareholder will be on the strategic committee for the future industrial policy of Renault."

While some resolution seems to have been reached, the French government could still feel the ire of the European Union (EU) Competition Commission for its actions as it will be questioned today. Following a statement by the EU Competition Commissioner Neelie Kroes last week (see France: 15 January 2010: EU to Question French Government About Pressuring Renault on Possible Clio Move), the country's Europe Minister Pierre Lellouche told Reuters that he was "surprised" that the legality of the move had be brought to question. He said in a statement that the government was entitled to approach the automaker over its production plans and that last year's state aid to the French auto sector was "totally compatible with [EU] community law." Lellouche added that "Nothing in the agreed commitments forbids the state as a shareholder from discussing the company's strategy with Renault's managers and expressing its wish to have a vehicle intended for the European market made in the EU." He also said that the government was ready to respond to any request, as well as calling on the EU to undertake further measures to protect jobs in the trade bloc.

Outlook and Implications

Following last week's rumours, Renault has become caught up in a political whirlwind over its future strategy, not helped by the focus being on one of the biggest selling cars in the country. The Clio is already the main vehicle manufactured at Flins, shared with the Novo Mesto facility in Slovenia, the Valladolid plant located in Spain, and by far the largest, its factory in Bursa (Turkey). It has already been revealed that Clio production in Slovenia will end as part of a small downsizing of the plant which will focus solely on the Twingo, while the same will take place in Valladolid as a sport utility vehicle (SUV) based on the Clio architecture will replace Clio and Modus production at the plant. However, it seems that Renault is aiming for its Zoe B-segment electric vehicle (EV) model to eventually take up the entirety of Clio production at the Flins facility sometime in the future. Despite Ghosn having said in a statement that "My responsibility and my motivation is to make Renault an innovative winner in an industry undergoing deep transformation," such a move would be a massively ambitious undertaking for a vehicle with currently publicly unproven technology. This is perhaps why Renault seems to be hedging its bets, and has not set any timeframe or volume for the Clio at Flins. The Bursa plant would also require significant investment to produce the additional Clios alongside the Fluence and the Mégane which are already built there, and making it a plant equivalent in size to Volkswagen's (VW's) Wolfsburg (Germany) facility. IHS Global Insight believes that despite interest in EVs being expected to grow in future, the Clio will remain the mainstay of Flins by some substantial margin, and output of this new EV will be at most around 40,000 units per annum until 2020, despite the French government aiming to significantly push the technology over the next decade (see France: 2 October 2009: France Reveals 2.5-bil.-Euro Investment in Subsidies and Infrastructure to Promote Electric Cars).

Perhaps more interestingly, this maelstrom has brought to the fore the possibility of increased influence from the French government. Reports suggest that the possibility of the government increasing its stake in Renault to perhaps 20% have been discounted on the grounds that it would give little in the way of further control over the business. However, a seat on the strategic committee would certainly be more effective, as well as making such issues that have been seen over the past week a less public affair. Among the areas which the French government may look to influence are the levels of employment at the business locally, and ways that production capacity in France can be increased, despite the possible cost implications for the business. However, any moves that indicate protectionism could well see the EU coming down harshly on Renault and the French government.