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Waiting for Renault's reaction

WHEN Peugeot signed a deal with Alain Prost to supply his Grand Prix team with its V10 engines in 1998, the company scored a major PR victory over its French rival Renault.

If the new alliance proves to be successful - and Renault bosses must assume that it will be - Peugeot will be able to make substantial sales gains in France. The opportunity to work with Prost was too good a marketing coup to turn down, although our sources suggest that Peugeot's continued presence in F1 was guarantee only when the French government agreed to postpone a proposed tax on diesel oil in France for three years. Around 45% of new car registrations in France are dieselĘcars.

Whatever the case, the Prost-Peugeot relationship is a reality and Renault bosses know that they must now find a way to combat that in the future. The problem facing Renault is that it has had to embark on a long-overdue program of job cuts, delayed by the company's privatization.

Although it is Europe's sixth largest car company Renault is struggling in the highly-competitive European car market. It is shortly expected to announce losses for 1996 of $520m.

In the last 10 days the company has announced that it is closing down a huge factory in Vilvoorde in Belgium with a loss of 3,000 jobs and another 1,000 likely to go from sub-contracting firms in the area. In addition Renault has had to inform its unions that 2750 jobs in France must be axed as well.

Pulling out of F1 - which the company announced it would be doing in June last year - was essential before such large-scale cuts could be made. The recent announcement that Renault will "sell" all its technology to sub-contractor Mecachrome seems to be little more than a way in which the company can avoid adverse criticism from unions and shareholders.

It seems likely that as soon as the furor dies down and the restructuring is completed that Renault will return to F1. Logic dictates that this will be in time to go head-to-head with the Prost-Peugeot project in 1998 or 1999.

Winning with Williams may not be enough for Renault when faced with Prost-Peugeot but it is hard to imagine that another French team could be set up and be competitive in time. There are several high-profile former F1 racers who might be able to front such a team.

This may or may not be related to vague rumors we have heard about Renault Sport testing a radical V10 F1 engine in strict secrecy in California about 18 months ago.

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