Renault Opens Factory in Morocco, Stirs Controversy at Home

Renault inaugurates on Feb. 9 a giant factory in Morocco to build low-cost cars, sparking controversy at home in France where a loss of industrial competitiveness has rankled.

Renault chief executive Carlos Ghosn and Morocco's King Mohammed VI were due formally to open the plant outside Tangiers, which is key for the carmaker's strategy to expand in the low-cost segment that already accounts for nearly a third of sales. But even before the ceremony began in Morocco a political storm raged in France, where the so-called "delocalization" of manufacturing, particularly in the auto industry, is a hot subject in the run up to a presidential election.

"It isn't something that is being done to the detriment of France," chief executive Carlos Ghosn said on French RTL radio on Feb. 9.

After figures earlier in the week showed a record trade deficit and resparked debate about the lack of competitiveness of French industry, Ghosn said "on the contrary [the factory] will increase work in France ... in our engineering labs, motor factories, and among our suppliers."

With an initial capacity of 170,000 vehicles but expected eventually to reach 400,000 vehicles per year, the Tangiers factory will help Renault keep up with demand for its low-cost Dacia brand and introduce new models, such as the Lodgy minivan.

Lower labor costs in Romania helped Renault position Dacia in the low-cost segment, and company executives say Morocco will help keep it competitive.

Jean-Christophe Kugler, who heads up Renault's operations in the Euromed region, said new factory provides labor savings over Romania "by a factor of two" with the average monthly wage in Morocco at around 250 euros ($330).

Renault has also received tax breaks and customs exemptions from Morocco.

Former industry minister Christian Estrosi, a member of the President Nicolas Sarkozy's governing UMP party, accused Renault, in which the French state still holds a 15% stake, of selling out French workers. He said "it is dangerous and intolerable for our country that Renault, in which the state is the largest shareholder, practices social dumping in Morocco to manufacture cars destined for Europe and France."

While Renault's Kugler called the Tangiers factory a "gateway to Africa", the company has not said to which markets 85% of its output is to be exported, sparking concern among unions that several French-built models may face intense competition.

A leader of France's far-right National Front called Renault opening the Tangiers factory "a real scandal" while another UMP party said the company had a "social obligation" to continue manufacturing at home.

Ghosn said that Renault, which received a 3.0-billion euro (US$4.0 billion) loan from the French state during the 2008 financial crisis, was keeping its promise to increase production in France and that it was investing in high technology activities in the country such as electric vehicles.