French aid prompts Renault move

French carmaker Renault is to shift some car production back to France after the guarantee of state aid.

Renault will take the production of its Clio Campus model to the Paris suburbs from Slovenia, creating 400 jobs, a French government minister said.

But the European Commission has demanded clarification about the plan, saying it may be protectionist.

France last month agreed to give Renault and Peugeot Citroen loans in return for keeping French plants open.

The plan to offer both Renault and Peugeot Citroen 3bn euros ($4bn; £2.8bn) sparked a row over protectionism after President Nicolas Sarkozy suggested that the money should not be used to rescue French-owned factories in Eastern Europe.

Luc Chatel, a junior minister for industry, announced Renault's decision in a local radio interview.

European concerns

EU Competition Commissioner Neelie Kroes told the BBC she was highly surprised and was seeking urgent clarifications. Ms Kroes said she received a pledge from Mr Chatel just a few weeks ago that the state bail-out for French car firms would not be linked to moving jobs to France.

If the aid proves to be conditional on this, Ms Kroes said it would be illegal under EU rules and should be paid back.

BBC correspondent, Oana Lungescu, said the clash comes at a pivotal point.

"This row couldn't have come at a worse moment for the EU, just as leaders meeting in Brussels are calling on the US and others to tackle the global crisis by avoiding all forms of protectionism," she said.

But Renault has defended its plans, saying its Slovenia factory was at full capacity and that the move to the Flins faciility in Paris would allow Renault to cope with additional orders.

In 2008, the French government said it would give consumers 1,000 euros if they traded in cars older than 10 years for a low-emission car.

'Increased production'

Renault spokeswoman Natalie Bourette said the move will not see job losses at Renault's Slovenian plant, which makes the Twingo and Clio models, but would rather be used as an opportunity to ramp up Slovenian production of the Twingo.

"Novo Mesto [the Slovenian plant] has no more available capacity, which is why we took the decision," she said.

Renault's claims were backed up by French President Nicolas Sarkozy.

"This is not about cutting jobs in Slovenia," he said.

"It doesn't take a single job from our Slovenian friends and it increases jobs for Flins," he added.

Meanwhile, Renault anticipates it will produce 8,000 Clio Campuses in Flins between June and October. Flins mostly produces the newer Clio III model.

Carmakers in Europe and beyond have been hit hard by the economic downturn.

Renault last month reported a steep fall in profits and abandoned its targets for 2009, blaming an economic crisis "of massive proportions". Sales in Europe were down more than 7%, it said.