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Why fight Chinese ownership of Peugeot?

Should France care if Peugeot is foreign owned? The answer is not really – what is important for France is that Peugeots and Citroens are still made in the country – says Laure Ferrari

There is much consternation in France concerning the possible buy-out from the Chinese of troubled car manufacture Peugeot. A typically parochial response was how it would be a tragedy if the company were not nationally owned. This is an understandable knee-jerk reaction but economically absurd.

Most automobile manufacturers in the modern world are listed in public ownership on international stock exchanges. Some manufactures are family owned or part owned and some with state sponsorship – among these are General Motors, BMW, Volkswagen, Renault and Peugeot.

Developing a new range of cars is an extremely expensive business, especially with the often-absurd European Union regulations that now add significantly to the cost of production. The market for middle-range family cars is too crowded. Profit margins are squeezed; everyone competes for this over supplied sector.

The margin is much higher in the luxury or quality end. Hence BMW, Mercedes, Bentley, Rolls Royce, Jaguar and Audi continue to do so well. People pay for a badge or social status as much as the vehicle itself. The Audi and the Skoda are now made from many of the same components but Skoda is not ‘cool’ in the executive car park.

Peugeot and Citroen actually make very good cars. They are significantly more stylish than most of their German counterparts and with much-improved build quality. However, their market is locked into the middle range. Indeed, France has not produced a luxury car since Facel Vega. That was a long time ago.

Should France care if Peugeot is foreign owned? The answer is not really. What is important for France is that Peugeots and Citroens are still made in the country. That the employees are French as are many of the suppliers and supporting companies and services. The contribution to the Treasury is via the company employee.

Many marques have disappeared from America and Europe since the war. Famous marques, Saab, Simca, MG, Rover, Riley, Wolsely, Austin, Morris, Buick, Studebaker the list is endless. They all failed because they were competing in the same market. Innovation, development and external costs killed them. Sometimes it was disastrous marketing failure.

The middle range is about economy of scale. Manufacture has to be in awesome numbers to trim costs. Chinese money could ensure the next generation of French cars – to the benefit of customers, company and the French nation.

Bentley, Rolls Royce and Jaguar were saved by German and Indian money. They thrive now in the luxury sector. They are simply the best cars in the world – say many commentators. The British huffed and puffed at the foreign control of Bentley and Rolls Royce – the icons of the automobile world – but what a happy ending.

Now MG, Rover, Austin and Morris have been replaced by super efficient Nissan and Honda plants in the United Kingdom; re-energising parts of Britain, which it had been assumed were beyond hope. Such are the salaries and employee benefits in these companies – produced by ruthless efficiency – the dead hand of the trade unions have been lifted, to the benefit of everyone concerned save union executives.

It is not a question of Peugeot or Citroen remaining French owned but whether they continue to exist at all. Politicians could help the industry by abandoning tax, regulatory and energy policies that will ensure there is no manufacturing left in Europe at all.

Laure Ferrari is a researcher working in the Europe of Freedom and Democracy group

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