Automotive sector: relocating industry to France, mission impossible?

Faced with the Covid-19 pandemic, the globalization of the economy, which has been at work for 30 years, has shown its limits. The coronavirus epidemic has raised awareness of France's dependence on emerging countries, and especially of its consequences in times of crisis.

Often seen as a sovereignist fad, the question of a strategic relocation of industries is making headway in public debate, while the time is ripe for reflection on the "next world". The case of Renault shows, however, that the relocation of industries to France is far from being won. The plan announced by its CEO on May 29 goes rather in the direction of strengthening the relocation of production.

President Emmanuel Macron, a staunch defender of the integration of France into economic globalization hammered him at the end of March: "We must produce more in France, on our soil. The next day will not be like the day of first, we must rebuild our national and European sovereignty. "

Even Medef, the employers' union, defends the idea. In his recovery plan presented on May 28, he said he wanted to "initiate a targeted relocation policy for strategic industries in France and Europe, with health as a priority".

In the automotive field, a first test for the government

The government wants to couple its economic recovery plan with the relocation of industries. With the automotive sector, hit hard by the Covid-19 crisis, he passed his first crash test. In return for the support of the French State to the tune of 8 billion euros granted to the sector (including 5 billion for Renault without increasing its participation in the capital of the former management), Emmanuel Macron asked "a series of "strong commitments which consist in relocating value-added production in France and in consolidating and maintaining industrial production on our sites".

However, despite the government's good intentions, Renault, one of the French flagships, announced Friday, May 29, the loss of nearly 4,600 jobs in France, out of 48,000, as part of a savings plan. 2 billion euros over three years. Employees at the Maubeuge (North) plant, where the automaker manufactures Kangoo electric utilities, immediately went on strike when production was to be transferred to Douai, 70 kilometers away.

Maubeuge big demo against the closure of the Renault site
This angry rumbling 🤬 pic.twitter.com/DlblJIH8QX

If Emmanuel Macron conditioned his support plan for the manufacturer to guarantees for employees, The case of Renault just underscores the difficulty of implementing a massive relocation policy which goes against several decades of French deindustrialisation.

Defend the existing

This is a point underlined by the economist, Nathalie Coutinet, lecturer at the University of Paris 13, in another area where the Covid-19 has highlighted the risks of dependence on the Asia in terms of supplies: health.

"Before talking about relocation, let's first try to preserve the existing industrial fabric," explains Nathalie Coutinet, who talks in particular about the Famar factory in Lyon, which manufactures Nivaquine (chloroquine sulfate) and Largactil (chlorpromazine) drugs currently being tested against Covid-19. In receivership since June 2019, the latter is still waiting for a buyer.

>> Read also: Covid-19 pushes France to relocate its pharmaceutical industry

"We must stop this game of massacre, which consists in taking into consideration only the shareholder value of the laboratories and not their public utility", pleads Nathalie Coutinet.

In full containment, the government has been active on the health front to allow the return of the production of masks on French territories. Indispensable for dealing with the pandemic, the masks have been the symbol of French dependence, especially on China, which is the main producer.

Relocate or reindustrialize ?

Louis Gallois, president of La Fabrique de l'Industrie and president of the supervisory board of PSA, also warns on BFM: "Me, I speak about reindustrialisation" he underlines. "This is what is important. Relocations must be seen on a case-by-case basis."

For the business manager, health, food and digital remain sectors where French industry retains strengths and opportunities. But he is much less optimistic in other sectors: "For certain industries, I do not believe it, it is true", he explains, noting that in the automobile, it is not rare that some countries require local production to access the market.

"A complete relocation of production processes to the national or regional level raises problems of rising production costs and lack of local skills," also said credit insurer Coface in a note. "Even if these two problems were resolved, this new local production process would still be dependent on the supply of raw materials, which remains very constrained by their location." In short, a pure and perfect relocation does not exist.

This increase in costs risks turning into an increase in the prices of products with relocated manufacturing. However, the French may never have been so ready. According to a recent survey, no less than 89% are in favor (including 47% completely), "even if it increases" the cost of products for consumers. A figure in clear increase compared to before the pandemic.

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