Renault orders factory shut-downs

The breaks are on for the French car maker

Renault will temporarily shut down production at two of its French and possibly also at two of its Spanish car factories over fears of a further fall in demand for its cars.

The workers at the Renault factories will be told to take time off as holiday, a move that is legal under France's 35-hour-week law.

Louis Schweitzer: Stock clampdown

The company blamed the closures on the growing risks of a sharp fall in demand for cars, given the uncertain outlook for the global economy, especially in the wake of the US terror attacks.

"The international context risks leading us into prolonged uncertainty," Renault chairman Louis Schweitzer said in an interview with the newspaper Le Monde.

"Building up excessive stocks, which would penalize us if there is a sudden change, is out of the question."

Outdated models

Mr Schweitzer's warning is particularly potent given that the crowded car market is already marred by overproduction and tough competition.

French car sales in September:

Peugeot: Up 17.2%

Citroen: Up 41.9%

Renault: Down 1.6%

Non-French models: Down 11.9%

Source: CCFA, figures indicate change since September 2000

Investment bank Credit Suisse First Boston (CSFB) has warned that Europe's car makers could face sharp falls in both sales and profits in 2002.

Making matters worse for Renault, some of its most popular models are due to be replaced within the next couple of years.

So the auto maker has also been hit by falling demand for its cars towards the end of their life cycle.

In France, Renault is falling behind its competitors, newly released statistics have revealed.

New car registrations in France were 2% higher in September than a year before, according to the French automobile association Comite des Constructeurs Francais d'Automobiles (CCFD) figures.

Renault's sales fell 1.6%.

Downed tools

Later this month, Renault's largest factory in France will be shut for four days, temporarily halting the production of its small cars Clio and Twingo, as well as of its mini people carrier Megane Scenic.

French car sales, last nine months:

Peugeot: Up 17.7%

Citroen: Up 12.8%

Renault: Down 1.5%

Non-French models: Up 3.3%

Source: CCFA, provisional figures

The French factory that produces the larger people carrier Laguna and its small vans Maubeuge and Batilly will be shut for one day early next month.

In addition, two of Renault's Spanish factories are expected to be temporarily shut down, though no details about this have been revealed.

Further closures

Le Monde has speculated that further closures at all these factories are likely before the end of this year.

Renault's response to the newspaper article was that as yet no decision about further closures has been taken.

Renault's shares, which late last month fell to their lowest level since January 1998, slipped more than 1.56% in morning trade in Paris to 31.50 euros.