Renault to Cut 17% of French Workforce by 2016 image

Renault will reduce its workforce in France by 17% in the following four years to cut costs as the European auto market will drop for the sixth straight year in 2013.

Renault, the automaker with saw the biggest sales drop last year, plans to lay off 7, 500 French employees by 2016, according to Sophie Chantegay, a spokeswoman for the company, adding that 5,700 jobs will be cut through attrition. The automaker expects these drastic measures to help it reduce the fixed costs by 396 million euro ($528 million). Dominique Chauvin, head of the CFE-CGC union at Renault said that in 2012 Renault’s production in France dropped 18% to 530,000 vehicles.

“It’s definitely an important and necessary step to do,” said Sascha Gommel, an analyst at Commerzbank AG with a hold recommendation on the shares. “Everything that reduces the cost base in the high-cost countries in western Europe is positive.”

Renault CEO Carlos Ghosn said that he expects auto market in Europe to fall 3% in 2013 after it fell last year to a two-decade low. Ford, GM and PSA Peugeot Citroen are also forced to close plants and reduce workforce due to slow demand caused by the recession.