Will a greener economy rescue France’s car industry?

Making manufacturers greener will strengthen local economies and may help President Macron in his quest for “European sovereignty”

Are the fires of French car manufacturers burning out? Almost sixty factories were under threat or closed down in France last year, including 16 car-making sites. And around 40 percent of jobs in the country’s metal industry, which produces crucial automobile components, are set to disappear by 2040.

Recent months have brought enormous challenges for the factories upon which France’s automobile industry depends. A tyre factory operated by the Japanese giant Bridgestone in the northern French town of Béthune was closed in November 2020, resulting in the loss of over 800 jobs. Despite the company insisting that the Covid-19 pandemic had not influenced its decision, the ongoing health crisis has had serious implications for the automobile sector. Around 80 percent of the sector’s operations ground to a halt in April 2020.

Another factory run by Michelin in the region of Vendée, which had been operating for almost 50 years, was also shut last year. And whilst Michelin did give its employees the chance to remain within the company, the closure forced over 600 people to alter their work circumstances. Sure enough, Michelin announced the closure before the pandemic. But the health crisis nonetheless squeezed the company’s profit for the first half of 2020 to just €310 million, compared to €1.44 billion for the same period in 2019.

The situation does not look good for the French metal foundries producing car components either, according to Le Monde. A smelting works with 260 employees in the eastern French region of Jura was placed on the market in November. Another two in the northeastern town of Villiers-La-Montagne and the southern town of Viviez are looking for buyers. If no buyer is found, the factories could result in 130 and 364 job losses, respectively.

Why are so many of France’s factories on their knees? Aside from the pressures of Covid-19, one of the biggest threats faced by French factories is that of “delocalisation”. Many companies are unable to maintain the competitiveness of their more expensive European operations vis-à-vis low-cost manufacturers in places such as Morocco, Turkey and parts of Eastern Europe. This was one of Bridgestone’s key justifications for closing the aforementioned factory at Béthune last year. One trade union representative connected to the metalworks in Jura cited the same issue.

According to the French-government-backed thinktank France Stratégie, France’s manufacturers have become “champions of delocalisation” over the past decade. The number of cars manufactured in France by French companies Renault and PSA Peugeot Citroën has visibly slumped over the past 15 years. Despite an encouraging increase in domestic production over the past two years (particularly for PSA), much work remains to be done if high levels of internal production are to be restored.

Will more factories have to close this year as the negative effects of Covid-19 make themselves known, on top of the pressures already faced by French manufacturers due to deindustrialisation? A handful of companies remain concerned about their books. For example, Renault intended to close a major factory in the highly industrial département of Yvelines last year. Yvelines is located in the northern French Vallée de la Seine, where more than a quarter of the country’s car industry is located. Renault and PSA operate the ten largest automobile factories there.

Thankfully, Renault decided to keep the factory open by converting its operations to refurbishing old cars, with the goal of contributing to a more circular economy. Yet, even if disaster was avoided this time, France’s largest automobile manufacturers are clearly under pressure. And if that pressure does gets too much, meaning that French companies relocate their operations abroad, there would be an utterly devastating impact upon local economies.

In this light, balancing the needs of local economies with the opportunities of the global economy will be a major priority for French politicians throughout the next decade. Officials will be hoping that French car companies remain buoyant, as the disappearance of local industries will increase social and economic deprivation, and fuel feelings of dispossession and anger. If left unattended, these feelings may well manifest themselves in support for the far-right Rassemblement national (RN). RN is popular in areas of industrial decline and has gained significant support in northern France, especially with the decline in popularity of the Parti socialiste throughout France. This will add to the pressure on President Emmanuel Macron as the race for the Elysée in 2022 intensifies.

Yet the situation may not turn out to be as detrimental as one might think. Whilst Observatoire Cetelem, a thinktank founded by BNP Paribas, estimates that it will take until 2023 for the French automobile industry to reattain its pre-Covid state, it predicts a 19 percent increase in French car sales for 2021. This is seven percent above the thinktank’s prediction for all world car sales, which must be good news for French companies.

Even then, France has much work to do in order to revolutionise its weakened automobile sector. The French government’s focus upon green economic renewal, however, provides an excellent opportunity to give a new lease of life to the country’s manufacturers.

Firstly, the transition écologique should enable French companies to expand their operations by manufacturing increasingly popular green products. One challenge faced by the aforementioned foundry in Jura is that its customers no longer wish to buy heavy metal components which increase a vehicle’s carbon footprint. The French government’s post-Covid recovery plan will hand €1 billion to car companies seeking to modernise and make their operations greener. Secondly, if carried out well, this will make the operations of French companies more unique, strengthening local communities and nipping a possible new wave of delocalisation in the bud.

Furthermore, helping French factories to make their operations greener is in France’s strategic interests. President Macron is particularly passionate about boosting “European sovereignty” by developing economic capabilities which are independent of China and the United States. Green diversification would enable France to enter the green technology market in which China currently leads, reducing France’s dependence upon other countries who may use this as a bargaining chip.

To this end, France’s government intends to invest €7.2 billion in green hydrogen engines over the next 10 years, which it hopes will also reinforce links between French and German businesses. This is another strategic plus. However, if France wishes to promote its own manufacturers and reduce delocalisation, French industries must be just as involved as German ones. The German car industry is six times larger than that of France, meaning that France has much to do in order to sharpen its industrial arsenal.

There are many incentives to make the French car industry more robust. France’s government should use the fallout of the pandemic to modernise and diversify the country’s out-of-date automobile enterprises, strengthening local economies, boosting “European sovereignty” and, most importantly, slashing carbon emissions. Letting the country’s car manufacturers go off the road would be detrimental for France’s workers, communities and businesses.

The consequences of inaction would be especially harmful for President Macron as he nears the end of his five-year term. Mr Macron should use this as an opportunity to demonstrate that France can be a European industrial heavyweight. Reinforcing French industries would also assist Mr Macron in promoting his passion for the European Union, and help him to prevent any increase in anti-global sentiment which could throw his continental centrism off course.

Data Visualisation: William Glendinning

Photo: Igor Schubin on Pixabay

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