French automaker Renault SA (EPA:RNO) is shifting most of the production of France’s second-most popular car, the Clio subcompact, to Turkey, much to the chagrin of union members and the new Socialist government.
The company already produces nearly half of its Clio units in Turkey, but on Friday Reuters cited unnamed union sources as saying the company has already decided to lower its French production to less than 30 percent; it already sourced 46 percent of the vehicles from Turkey and 13 percent from Spain, according to the report.
Renault is mum on the details of where the 2013 Clio IV will be manufactured. Any shift of production off French soil will draw rebukes from the Élysée Palace. After it was reported in 2010 that Renault was shifting Clio production abroad, CEO Carlos Ghosn was publicly condemned by then-President Nicolas Sarkozy.
"They're obviously under pressure and may have to decide whether to build more (Clios) in France to keep the peace with the government," London-based UBS analyst Philippe Houchois told Reuters.
In July, Social Affairs Minister Marisol Touraine decried competitor Peugeot SA’s (EPA:UG) decision to shut down a production facility outside of Paris, costing 8,000 jobs. PSA Peugeot Citroen produces 64 percent of its European-sold vehicles in France, compared to 42 percent for Renault.
Both Peugeot and Renault, along with European automakers in general, have been struggling amid the euro zone’s sovereign debt crisis that has sent the continent's auto market reeling. For the first half of 2012, Renault sold 1.33 million units overall, 3.3 percent fewer than the first half of 2011. Revenue was down 0.8 percent in the same period, to €20 billion ($26 billion). The company expects global auto demand to grow 5 percent this year while European demand will shrink by as much as 7 percent and France’s demand will contract by as much as 11 percent.
The 2013 Clio IV was publicly unveiled at the 2012 Paris Motor Show taking place through Oct. 14.
In August, Renault announced it was expanding its Brazilian capacity by 25 percent. Brazil is Renault’s second-largest market. The company also announced a global buyout offer to 4,500 of its employees.