The French government is set to announce a loan of 6 billion euros (7.75 billion dollars) to aid France's two large auto makers, Renault and PSA Peigeort Citroen, several dailies reported on Monday.
In exchange for the loans of 3 billion euros to each company, at interest rates significantly below market levels, Renault and Peugeot have committed themselves not to shut any French factory or outsource production abroad for the period of the loan, which is five years, dpa reported.
Although the loans will not be accompanied by a partial nationalization of Peugeot or an increase of the state's 15 per cent share of Renault, every industrial decision taken by the two companies will be examined scrupulously by the government, the daily Les Echos reported.
In addition, the companies committed themselves to reducing dividends and bonuses for their executives.
The announcement, expected to be made later Monday, will come several days ahead of the publication of the results for last year of the two auto makers, and after several weeks of intense negotiations.
According to the daily Le Figaro, the head of PSA Peugeot Citroen, Christian Streiff, resisted the demands by President Nicolas Sarkozy not to outsource production to low-wage countries, because it was impossible to make such promises, he said.
However, the company has been severely hit by the economic crisis, with losses in the second half of 2008 estimated at 2.6 billion euros.
Renault's situation is even more dire, with Credit Suisse estimating that the company's debt will rise from 3.5 billion euros in the first half of 2008 to 5.4 billion euros at the end of the year.
In addition, Renault's Japanese partner Nissan on Monday estimated it would incur an operating loss of 180 billion yen (1.96 billion dollars) for fiscal 2008, which would be the first operating loss for Nissan in 14 years and the first loss since the partnership with Renault was formed in 1999.