Renault SA, France’s second-largest automaker plans to lower its fixed cost base by reducing the amount of cars it needs to sell per year before it can break even to 2.4 million from 2.6 million, Reuters reports citing Renault’s chief operating officer.
“Reducing the breakeven point of the company is a must … we want to protect ourselves from volatility,” said Carlos Tavares.
“That means in our mind being able to absorb a (vehicle sales drop) of 20 percent.”
Renault’s five-month European deliveries dropped 19 percent, compared with a 7.3 percent decline for the industry as a whole in the region, according to ACEA data.
The French automaker’s European market share during that period dropped to 8.3 percent from 9.6 percent, according to ACEA data. The carmaker, which hasn’t reported any profit figures for 2012 yet, posted a 0.7 percent decline last year in earnings before interest and taxes to 1.09 billion euros.
France was one of the earliest pioneers in automobile production and the sector, according to some estimates, accounts for 10 percent of the workforce.
Auto giants PSA Peugeot-Citroen and Renault have been complaining that production costs are too high to be competitive.
“The management has indicated very clearly and perhaps for the first time that it has no solution… for French factories, especially the one in Aulnay,” said local mayor Gerard Segura from Hollande’s Socialist party.
Now, France’s new Socialist government is considering reviving state aid again for its struggling car industry following an appeal for help by Renault.
France bailed out Renault and PSA Peugeot Citroën, its other carmaker, with €6bn worth of low-interest loans in 2009, after the crisis depressed sales. It also ran a scrappage and further incentive scheme to boost car sales for two years from the end of 2008, which cost the state €2.2bn.