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Renault to Make Nissan Micra Compact at French Car Plant

Carlos Ghosn, Chief Executive Officer of Renault SA (RNO), Europe’s third-biggest carmaker, predicted that the European car market will probably shrink further in 2014 and 2015 as rising unemployment continues to sap consumer demand.

“I think that 2014, 2015 are going to be at best stable in Europe,” Ghosn, who also runs Yokohama-based Nissan Motor Co. (7201) - - 43 percent-owned by Renault -- said in an interview today in Aix-en-Provence, southern France.

“More realistically, we may see another decrease, maybe not as violent, as deep as the ones we have seen for the last years, but I’m not very optimistic about the situation in Europe because I don’t see what is going to trigger, to really start the growth, particularly for the auto industry,” the CEO said. The global auto market will go “from record to record” on demand in emerging markets, where the number of car per inhabitants is much lower than in Europe and the U.S., he said.

European car sales fell to a 20-year low in May as rising joblessness caused by a recession in the euro region reduced demand at PSA Peugeot Citroen, Renault, Fiat SpA and General Motors Co. European political leaders are seeking ways to revive a shrinking economy weighed down by sovereign-debt crises, with unemployment in the 17 countries using the euro reaching a record 12.2 percent in April.

“As long as there is a discussion about deficits, I think it’s going to be a big weight on the shoulders of the consumers,” Ghosn said, adding that they will remain skeptical about the economy growing anytime soon.

Reorganizing Production

Like French rival Peugeot, the carmaker is reorganizing production as sales plummet in Europe amid a recession. Renault said in April it will build the next version of Japanese partner Nissan’s Micra compact car from 2016 in its home country of France in an effort to use excess capacity.

The decision is partly the result of a labor-efficiency agreement that Renault, based in the Paris suburb of Boulogne-Billancourt, reached in March with unions, it said. The deal with unions includes cutting the workforce in France by 17 percent and freezing pay this year in exchange for a pledge not to close any plants in the country for three years.

“We’re trying to be very creative” and we’re “hoping to cross the crisis without too much damage,” the Renault CEO said. He expressed confidence that economic slowdowns in economies like Brazil, Russia, India and China, known as the BRICs, are only temporary, and said the ratio of cars per inhabitants will continue to rise there.

“The BRICs are here to stay for a very long time,” he said. There’s one car for two people in Europe, twice as many as in Brazil and Russia, and just one car per 20 people in China, he said.

“On the top of that, you have new countries emerging, Indonesia, Southeast Asia,” other Latin American countries, Africa and the Middle East, Ghosn said. “That’s what makes me optimistic overall for the car industry that we’re going to go from record to record in terms of global sales, even though the contributions are going to change.”

To contact the reporter on this story: Francois de Beaupuy in Aix-en-Provence at fdebeaupuy@bloomberg.net; Caroline Connan in Aix-en-Provence at cconnan@bloomberg.net.

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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