Renault Chief Counts On 'Nissan effect' For His Three-Year Plan

Carlos Ghosn, the new chief executive of Renault announced plans on Feb. 9 to apply his Asian success formula to turn the French group into the most profitable car manufacturer in Europe. Ghosn, who is credited with transforming Japanese carmaker Nissan, said that launching new models and reducing operating costs would be key elements in his three-year strategic plan for Renault. Nissan is 44% owned by Renault and Ghosn is currently chief executive of both companies.

Earlier on Thursday, the group had announced that operating profit plunged by nearly 40% in 2005 to 1.323 billion euros (US$1.583 billion) and Ghosn said the group was in a precarious position. "Renault is not in crisis but remains fragile," he said at the group's headquarters near Paris.

Ghosn announced that 26 new models would be rolled out between now and 2009 in an effort to refresh the aging range of Renault cars, with launches aimed at the sports utility vehicle (SUV) and four-wheel-drive segments of the market. After the launch of two cars in 2006, an average of eight new models per year would be rolled out between 2007 and 2009 with the focus also on improving the offering of Renault in the high end of the market. The focus on luxury cars mirrors similar efforts at Nissan, where Ghosn became chief executive in 1999 and succeeded in turning an ailing, debt-ridden group into one of the world's most profitable car companies.

Renault is currently seen as highly dependent on its Megane line of cars, sales of which are concentrated in Western Europe. Other popular Renault models include the Twingo, Clio and Espace.

Commenting on Renault's operating margin for 2005, Ghosn said: "We cannot be satisfied with an operating margin of 3.2%. Not only because it is slightly inferior to the average margin of other world carmakers, which is 3.6%, but because it is below the potential of Renault". He said that the margin would fall to 2.5% this year before rebounding to 6.0% in 2009.

This target would be achieved by reducing purchasing costs, improving productivity and capacity utilization in Renault's factories, moving some engineering activities to Romania and South Korea and cutting investment by 50%, he said.

Ghosn sought to reassure staff on the sensitive subject of job cuts, which are feared by Renault's 130,000-strong workforce. "There is no plan or project at the moment to reduce our workforce," he said, but added that the success of his plan was "essential to avoid a restructuring".

After the presentation of his strategy, which had been a closely guarded secret, between 1,000-2,000 Renault employees protested outside the headquarters of the company about the possible social consequences of the plan.

Copyright Agence France-Presse, 2006

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