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France may take carmakers' shares

2009-01-20 06:28

Paris - France could offer financial assistance to the battered auto industry in exchange for stakes in carmakers, French industry minister Luc Chatel said, ahead of a meeting on Tuesday at which aid measures should be announced.

French President Nicolas Sarkozy said on Thursday France would put "a lot of money" into aid for the car industry, which is one of France's biggest employers.

Economy minister Christine Lagarde said last week the government was likely to announce measures to boost carmakers' capital and improve financing for car purchases, but Chatel said in an interview published on Monday nothing had been decided.

"Carmakers' needs are not necessarily in the form of boosting their capital but, in exchange for our financial support, taking a stake in (companies') capital can, in some cases, be a fair trade," Chatel told daily Le Figaro.

The government is due to meet car industry representatives on Tuesday and detail a plan to help in the face of a big drop in sales due to the economic crisis and credit restrictions.

Another newspaper, Le Parisien, reported that the plan would be worth a total of between 5 billion and 10 billion euros.

Le Parisien, which did not identify or describe its sources, said the government was prepared to boost the capital of carmakers' lending arms and was considering other measures such as deferring tax payments for carmakers' suppliers.

The government was also considering acquiring stakes in carmakers, the newspaper reported, even though it said the finance ministry believed there was a risk that would annoy the firms' existing shareholders.

The state could, however, more easily acquire stakes in suppliers or subcontractors, the newspaper said.

Studying possibilities

Chatel declined to provide details on how the state would help listed carmakers such as PSA Peugeot Citroen and Renault, but said several options were being considered.

"Loans at favourable rates, loan guarantees, convertible bonds - we are studying all the possibilities," he said.

"The major issue is what is given in exchange. This support plan will not be a gift. Carmakers will notably have to commit to keeping industrial sites in France," he said, adding that the plan would also cover foreign carmakers with sites in France.

France has been in talks with the European Commission, the European Union's competition authority, on the plan and Lagarde said last week she had asked the Commission to coordinate EU aid to the car sector.

Chatel said the Commission was already planning to loosen the aid framework but there were limits to what it could accept.

"There are some measures that it is not prepared to allow - it is notably hostile to fiscal aid for a single sector. In any case, we will be acting within the broader framework of a European action plan," Chatel said.

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