Ghosn Puts His Stamp on Renault

February 19, 2006

2006 Detroit Auto Show, Part VIII by Bengt Halvorson (1/9/2006)
Jeep Compass, Toyota Camry, Nissan Sentra and Urge.



Just as he did at Nissan, Carlos Ghosn is planning to use a new product offensive to boost the fortunes of Renault with a combination of judicious cost-cutting and a move upmarket.

At the same time, Ghosn also is ordering Nissan to move deeper into the commercial vehicle market and to maintain a close watch on costs, including those inNorth America, where the company has moved to limit its future liabilities for retiree healthcare.

At Renault’s annual press conference in Paris , Ghosn unveiled his plans for the French automaker, including a bold plan to raise sales volumes by almost one-third within four years. The plan includes bringing 26 new Renault models to market including a number of upscale models. “That’s not a forecast, it’s a commitment,” said Ghosn, who used the same approach to launch the Nissan turnaround in 1999.


The new product offensive also is designed to reduce Renault’s dependence on the Mégane compact. “This heavy dependence on a single product is a source of vulnerability for the company,” Ghosn said. Ghosn also ruled out any attempt by Renault to enter the North American market before 2009.

Ghosn faces a big challenge moving Renault back into the limelight. The one big difference between Nissan and Renault, however, is that Ghosn is starting from a position of relative strength. The goal to boost sales was announced after Renault posted a 19-percent increase in net income. Most of the increase came from a 35-percent boost in Nissan’s contribution to Renault. Without the increase in Nissan’s contribution, Renault’s net income would have dropped 16 percent, according to the figures provided in a year-end financial report. Renault revenue grew only 1.3 percent in 2005.

Nevertheless, with $3.9 billion in profit in the bank, Ghosn was able to sidestep a showdown with Renault’s hard-nosed unions. Since the company is planning to sell an additional 800,000 vehicles before the end of the decade, there is no need for layoffs, Ghosn said. At Nissan Ghosn eliminated more than 20,000 jobs in his effort to make the Japanese automaker profitable again.

Renault, like other European automakers, faces a host of challenges, including intense competition, higher prices for basic materials and the extra costs from a new wave of EU safety and environmental standards. Meanwhile, most forecasts, from inside and outside the auto industry, expect demand for new vehicles to be relatively flat across Europe. However, Ghosn appears to have calculated that an offensive thrust by Renault would put extra pressure on the European operations of General Motors and Ford, which are struggling.

Ghosn also is promoting closer cooperation with its alliance partners. Thus, South Korea–based Renault Samsung Motors is developing sport-utility vehicles and crossover models for distribution in other Renault markets, he said.

Just last week, Nissan announced plans to supply a light truck built in Spain to Renault Truck, which is part of the Volvo Group (unrelated to Volvo Cars, a subsidiary of Ford). By reducing the number of parts unique to each model and leveraging the vehicle platforms and powertrains it shares with Nissan, Renault hopes to halve research and development costs for each new model, Ghosn said. “It’s a question of doing twice as much with the same amount,” Ghosn said. Some 3000 new engineering staff will be hired, mainly in Romania, Korea, and Brazil.

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