Renault Gains Union Backing to Eliminate 7,500 Positions

Renault SA can move forward with eliminating 7,500 jobs and freezing wages after two of the main unions at France’s second-largest carmaker gave their approval.

“We decided earlier this morning to sign the agreement,” Jean-Yves Sabot, head of the FO union’s automotive branch, said today by phone. The CFE-CGC said Feb. 22 it would back the deal.

The two unions represent about 45 percent of Renault employees. Under French law, a company needs the support of unions representing at least 30 percent of the staff for a collective bargaining agreement to be valid.

The deal enables Renault, based in the Paris suburb of Boulogne-Billancourt, to reduce its French workforce 17 percent by 2016 through attrition. Labor leaders also agreed on a wage freeze for 2013 and to increase the average number of working hours. Annual savings from the cuts will reach 500 million euros ($652 million), Gerard Leclercq, head of Renault’s French operations, said on Jan. 30.

“This is significant,” Philippe Houchois, a London-based analyst at UBS AG, said by phone. “It brushes up Renault’s competitiveness compared to Spain” or Nissan Motor Co.’s U.K. factory in Sunderland, he said.

The shares rose as much as 3.5 percent to 51.69 euros and were up 3 percent as of 3:12 p.m. in Paris trading. The stock has gained 26 percent this year, valuing the company at 15.2 billion euros.

Law Change

The next step is a national works council that will take place on March 12, Stephane Guilbaud, a Renault spokesman, said today in Geneva. The CFDT and CGT unions, the other two of the four biggest unions, haven’t yet decided whether they will support the plan, said Sophie Chantegay, a spokeswoman for the carmaker.

President Francois Hollande’s cabinet today endorsed plans to revamp France’s job market. The proposed law is based on a January agreement reached between French business leaders and three unions giving companies the right to reduce working time and salaries when demand slows while also extending medical and unemployment benefits and increasing taxes on short-term contracts.

Global Deliveries

Renault’s global deliveries fell 6.3 percent to 2.55 million cars and light vehicles last year, with a 19 percent sales drop in Europe that was the worst among automakers based in the region. The manufacturer is working to increase its presence in emerging markets to reduce its reliance on recession-plagued southern Europe.

The carmaker said on Jan. 22 that it’s willing to increase production in France by 15 percent once a labor deal is reached.

Renault’s French factories may build 80,000 more vehicles a year by 2016 to supply manufacturers that the French manufacturer cooperates with, including Nissan Motor Co. and Daimler AG, the carmaker said on Jan. 22.

Daimler’s Mercedes brand is looking at building A- and B-Class models at a Renault site, German newspaper Auto Motor und Sport reported today, citing unidentified Mercedes employees. Raluca Barb, a spokeswoman for Renault, and Martin Steinlehner, a Daimler spokesman, declined to comment. Renault’s full-year production in France amounted to 530,000 vehicles for its own brand in 2012.

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