Renault, Peugeot Pledge To Repay French Loan Early

Renault and Peugeot-Citroen both plan to repay early, the €3 billion loans they each received early in 2009 from the French government to help tide them over the most difficult part of the recession.

Both loans carried a six per cent interest rate, and came with strings attached. This included an agreement not to shut down any French factories for the duration of the loans, originally set for repayment by 2014.

This was believed to have stopped Peugeot-Citroen implementing its plan to move more production from France to eastern Europe, while Renault found itself in hot water when it appeared to try and move some production of its big selling Clio to Turkey. It pulled back after it felt the ire of French President Nicolas Sarkozy, who hinted that the French state with its 15 per cent stake might be persuaded to take a more active management role.

Leak
Renault leaked its intention to repay the loan early through the Les Echos newspaper, which said Renault CEO Carlos Ghosn wanted to coordinate the repayment with Peugeot-Citroen. Peugeot CEO Philippe Varin said the company would soon repay €1 billion, but didn’t give any more details.

Renault’s Ghosn said the company should return to profitability next year. Renault will also announce a new medium term plan at the end of 2010. Ghosn said the new plan would feature synergies with new partner Daimler, while strategies for emerging markets and electric cars would also have a high profile.

Investors will hope that Ghosn’s new long-term plan has more success than the last one, which crashed and burned during the recession. That plan – Ghosn’s “Renault Commitment 2009” included the pledge to become Europe’s most profitable car company by 2009, boost annual car sales by 800,000 vehicles and raise profit margins to 6%.

Renault lost €3 billion in 2009, compared with a profit of €600 million the previous year.