We Really Can learn from France, where government loans 8 Billlion to France’s two big automakers,

It's going to be a real mess, having the U.S. government intimately involved with running Chrysler and GM, based on what's happening in France, where government loans to France's two big automakers, Renault and PSA Peugeot Citroen have touched off a chain reaction of controversies in less than a week.

The French government on Feb. 9 approved about $8.4 billion worth of loans to the two companies, reportedly on condition that the companies preserve production and jobs in France.

The ink was barely dry when according to Bloomberg, PSA CEO Christian Streiff announced the company is cutting 3,000 jobs, on top of 3,500 job cuts already announced in December.

The government loans and the job cuts are creating problems both inside and outside France. Outside France, officials in other European countries are quick to question whether the French government loans could be seen within the European Union as anti-competitive, if the idea is to support jobs in France. France's EU partners are watching to see whether PSA's job cuts fall disproportionately on workers in their countries.

Within France, the job cuts put PSA in the position of justifying job cuts on the heels of at least an implied promise not to cut jobs. If Renault tries to get around that by limiting cuts in France to voluntary separation packages, that could further inflame critics, if the job cuts in other countries are involuntary.

There's even a contrary aspect to all this. Streiff said in published reports he intends to keep pursuing a strategy where PSA builds cars outside France. That could offend the economic nationalists who like the idea of French protectionism. Everyone can find something to dislike about these loans.

U.S. politics aren't going to be any better, with Chrysler and GM due to submit business plans to the Treasury Department next week. The still-unnamed "car czar" will have the power to force Chrysler and GM into bankruptcy. The presidential appointee will also need to approve all expenditures over $100 million.

What's going to happen if the company in question is quote-unquote "exporting jobs" to other countries? Also, $100 million isn't a whole lot by auto industry standards. Prior to the recession, that was enough to pay for a decent-sized marketing launch for one major new model.

What's going to happen if a government appointee signs off on the money for an advertising campaign that offends some group, or generally pushes the bounds of bad taste?

Don't say it can't happen here. Remember the Lingerie Bowl, which Chrysler was going to run against the Super Bowl in 2004? Chrysler backed out of the Lingerie Bowl, but only after a howl of protest. Now imagine the reaction if a presidential appointee had signed off on the expense, as one item buried within a big marketing campaign. Ooo-la-la.
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