French car maker Renault SA is aiming to cut 7,500 jobs on its home patch by 2016 to help boost competitiveness as the slump in its domestic and European markets shows no sign of easing.
The job cuts, which are equivalent to 14 per cent of Renault's French staff, will be a further blow to French President François Hollande, who has made creating employment his priority for this year as the jobless rate reaches 13-year highs.
Renault is pushing workers to accept a new nationwide deal on pay and conditions to cut costs and align productivity with cheaper European sites such as its Palencia plant in Spain and alliance partner Nissan Motor Co. Ltd.'s Sunderland factory in England.
The company hopes about three-quarters of the cuts will be achieved through normal staff turnover, a Renault spokeswoman said on Tuesday following the latest in a series of meetings with unions.
Auto makers across Europe are having to cut costs and capacity so they can still turn a profit while the euro zone debt crisis and resulting government austerity measures sap consumer demand. Car sales in France, Spain and Italy fell to their lowest levels in years in 2012.
Rival French car maker PSA Peugeot Citroën is struggling to reverse mounting losses by scrapping more than 10,000 domestic jobs and closing an assembly plant near the French capital.
Japanese car maker Honda Motor Co. Ltd. on Friday unveiled plans to cut about 800 jobs at its plant near Swindon in southwest England owing to falling demand for its vehicles across mainland Europe.
Renault, which had about 128,000 employees worldwide at the end of 2011, said it did not plan any compulsory or voluntary redundancies. It also repeated that if it reached a deal with workers, it would forgo any site closings in France.
A further meeting is planned with Renault management on Jan. 22.
"It's a reasonable adjustment, taking into account the massive overcapacity that the [mass-market car makers] are facing in Europe," said Macquarie Securities analyst Jens Schattner.
"It gives them annual cost savings without having to reduce aggressively – there will probably be only limited cash out for restructuring charges."
Shares in Renault closed 1.8 per cent higher, outperforming the European sector index, which was up 0.1 per cent.
"We have reaffirmed our desire to maintain Renault's corporate and core activities in France, whilst taking the necessary steps to lower the break-even point," Gerard Leclercq, chairman of Renault's France operations, said in a statement.
The job cuts would rise to 8,200, or 15 per cent of French staff, excluding new hires, over the next four years, according to CGT union representative Fabien Gache. "This is a fresh bloodletting among staff, which will weaken Renault further over the coming years," he said.
French car registrations fell 15 per cent last month, leaving the full-year down 14 per cent to 1.9 million vehicles – the lowest since 1997 – French industry group CCFA said. Renault group's French registrations plunged 27 per cent in December.
Mr. Hollande's administration is struggling to stop losses of industrial jobs while curbing public spending and raising taxes to try to slash debt in a stagnant economy.
The government pledged this month to reallocate €2-billion ($2.7-billion) from its 2013 budget to state-aided job creation.
Finance Ministry officials were not immediately available for comment.
Renault has forecast positive free cash flow for 2012. Its sales in the third quarter of last year fell 13 per cent for a nine-month decline of 4.7 per cent to €29.4-billion.