France Raises Nationalization Spectre For Renault, PSA

The French Government will throw everything, up to and including nationalization, to save its two auto giants from failure during their Coronavirus shutdowns.

Without naming either of France’s two automakers, the Government this week teased that it was prepared to nationalize one of them if it had to, to save “icons” of French industry.

Both PSA Groupe CEO Carlos Tavares (also the World Car of the Year award’s Man of the Year this year) and Renault’s Chairman Jean-Dominique Senard spoke directly with France’s Finance minister, Bruno le Maire on Wednesday.

“The situation is extremely clear,” le Maire said on BFM Business radio Thursday.

“It is out of the question to see big French companies, industrial icons, disappear.

“If to protect our national industrial heritage, we have to resort to nationalization, we are prepared to go that far,” he added.

That seems like a huge statement in an industry that has long since shied away from nationalization (where the Government owns and is responsible for the operation of a car company).

While le Maire refused to mention one of the brands by name, the implication clearly referred to Renault. The company was appropriated by President Charles de Gaulle in 1945 and was only privatized in 1996. The PSA Groupe has always been private.

Le Maire promised up to €300 billion in loan guarantees, tax deferrals and payroll charges for troubled companies, though stopped short of promising straight-up bailouts.

The situation in Germany is less clear, with Mercedes-Benz’s parent company, Daimler, showing signs of financial strain. Its market capitalization has fallen 54 percent in 12 months to just €23.6 billion, it has set aside billions in cash for diesel scandals of its own and it returns only €560,000 per employee.

By contrast, BMW has fallen only 45 percent and makes €724,000 per employee.

Daimler has also admitted it will find it difficult to meet the tough, expensive new EU7 emissions laws, with an average fleet target of 95 grams of CO2 per kilometre, while BMW is well under its limits, as is the Volkswagen Group.

Rumours are already circulating that Daimler could soon become a target of a hostile takeover and there is little indication that the German Government would come to its defense if it did.

Meanwhile, in France, speculation is rife as to which of its two national automakers could have so concerned its Government that it would raise the spectre of nationalization.

The French Government already owns 15 percent of Renault (as does Nissan, though the Japanese company has no voting rights), with Daimler’s pension trust owning 3.1 percent and the almost all of the rest of the shares floated publicly. 

The Government also owns 13.68 percent of PSA Groupe (as does Chinese carmaker Dongfeng and the Peugeot family) with the rest floated.

One difference between the two companies is that Peugeot has four brands to Renault’s two (including Dacia). PSA also made a record €2.83 billion in net profit in 2019 and Renault made just €20 million.

While PSA, the parent company of Peugeot, Citroen, DS and Opel, seems strong enough to stand on its own two feet and still swallow a €50 billion Fiat Chrysler Automobiles merger, Renault’s market capitalization has plummeted 76 percent in the last year to just €4.5 billion.

It has also been poleaxed by the scandalous Japanese arrest and escape of former CEO Carlos Ghosn’s under a financial mismanagement cloud, along with insurgency from its captive Nissan alliance partner.

PSA’s value stood at €8.9 billion today, while the world’s two biggest carmakers, the Volkswagen Group and Toyota, are valued at €58.2 billion and US$162 billion.

Either company could buy Renault or PSA (or both) outright from their cash reserves and still have change.

The saving grace for Renault is its 44 percent ownership and voting control of Nissan, which is valued at US$13 billion, however Nissan’s value has also plummeted 61 percent in the last year.

PSA gobbled up GM’s cast-off Opel in 2017 and is in the process of merging (a takeover, in effect) of Fiat Chrysler Automobiles to give it a critical footprint in the North American market.

The 121-year-old Renault has no position in North America while PSA will soon be able to boast Alfa Romeos, Maseratis, Jeeps and RAMs.

Le Maire made no precise promises to the carmakers during the call, saying instead that he would present possible options to President Emmanuel Macron.

Both PSA and Renault have closed their factories in Europe indefinitely, with the virus smashing both companies as they struggled to recover from the slumping Chinese market.