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First test of Macron's industrial policy looks decidedly old-school
June 30, 2017 / 4:18 PM / a month ago

First test of Macron's industrial policy looks decidedly old-school

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French President Emmanuel Macron gestures during the press conference after the meeting at the Chancellery in Berlin, Germany June 29, 2017.Fabrizio Bensch

PARIS (Reuters) - President Emmanuel Macron wants to liberate France's economic forces and transform it into a country of risk-taking entrepreneurs, but his government is hardly breaking with tradition in its first big industrial test.

While Macron likes to spend time talking about France as a "start-up nation", his government is using a time-honoured recipe of taxpayer cash and leaning on big companies it owns stakes in to rescue car parts supplier GM&S.

After weeks of seeking a buyer for GM&S, the secretary of state for economic affairs, Benjamin Griveaux, is hopeful one has been found. But the deal involves the state stumping up 5 million euros (4.40 million pounds) to finance investments, with a further 5 million euros each from the buyer and carmakers Renault (RENA.PA) and PSA Peugeot Citroen (PEUP.PA), Griveaux said on Friday.

Against that backdrop, Macron's government is left trying to appear neither impotent nor heavy-handed.

"It's not up to the state to do everything, as that would be a bad handling of the case," Griveaux told RTL radio.

"It's also not up to the state to stump up the totality of the funds in this case. Its role is to get everyone involved and around the table."

Though Macron's economy minister, Bruno Le Maire, has been instrumental in the efforts to save GM&S from going under and preserve the 277 jobs on the line in the country's rural heartland, where work is scarce, the self-professed free-marketeer couldn't help but let out some irritation at a round table of business leaders last week.

"It's typical of the French system. A company was set up in the 1970s in middle of the boondocks to bring activity to a region," he said.

"There is no industrial network around, there's only a few big clients for a small company. It's just not solid."

Originally a children's scooter maker, GM&S soon adapted to supply mainly Renault and PSA with car parts but gradually became uncompetitive, leaving it clinging to any orders the two carmakers throw its way.

The government, which holds sizeable stakes in both Renault and PSA, has also been convincing the carmakers to keep millions of euros of orders flowing to GM&S.

Even then, only 120 jobs are expected to be saved under the deal, which looks decidedly old-school, with the state playing a central role in corporate fortunes.

"GM&S was originally a corporate issue, but it has become a political issue. It's clear that the new government does not want to have to deal with corporate failure in the first weeks of its mandate," said a source who knows the sector well.

The French have for centuries looked to the state to help to shape key industries ranging from textiles in the 1700s to high-speed trains in the 1960s.

But the failure of Macron's predecessor Francois Hollande to prevent the shutdown of the Florange steel mill in the eastern rustbelt and a PSA factory in a rundown Paris suburb proved to be an albatross around his neck throughout his presidency.

As Hollande's economy minister, Macron had not hesitated to meddle in the running of some state-controlled companies, Renault and Peugeot in particular, while adopting a more laissez-faire attitude in other cases, such as Alcatel's takeover by Nokia (NOKIA.HE).

Additional reporting by Gilles Guillaume; Editing by Michel Rose and David Goodman

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