Renault three-year plan relies on 'Nissan effect'

9th February 2006, Comments 0 comments

PARIS, Feb 9, 2006 (AFP) - The new chief executive of Renault announced plans on Thursday to apply his Asian success formula to turn the French group into the most profitable car manufacturer in Europe.

PARIS, Feb 9, 2006 (AFP) - The new chief executive of Renault announced plans on Thursday to apply his Asian success formula to turn the French group into the most profitable car manufacturer in Europe.

Carlos Ghosn, who is credited with transforming Japanese car maker Nissan, said that launching new models and reducing operating costs would be key elements in his three-year strategic plan for Renault.

Earlier on Thursday, the group had announced that operating profit plunged by nearly 40 percent in 2005 to EUR 1.323 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.

In midday trading, the price of shares in the company dropped 1.85 percent to EUR 74.25 in a broadly higher market. The price of shares had fallen earlier on Thursday to EUR 71.90.

Ghosn, who was appointed less than a year ago, announced that 26 new models would be rolled out between now and 2009 in an effort to refresh the ageing 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, he said, 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.

Nissan is 44-percent owned by Renault and Ghosn is currently chief executive of both companies.

Ghosn, who is also credited with restructuring French tyre maker Michelin, said that he aimed to make Renault "the most profitable generalist car maker in Europe".

Commenting on Renault's operating margin for 2005, Ghosn said: "We cannot be satisfied with an operating margin of 3.2 percent. Not only because it is slightly inferior to the average margin of other world car makers, which is 3.6 percent, but because it is below the potential of Renault".

He said that the margin would fall to 2.5 percent this year before rebounding to 6.0 percent in 2009.

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

The increase in new models would help the company sell an additional 800,000 vehicles between 2005 and 2009, Ghosn said, with a rising proportion sold outside Europe.

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.

Renault said earlier Thursday that net profit in 2005 totalled EUR 3.367 billion, a rise of 18.7 percent compared with 2004 and the best result in the history of the company.

This figure was boosted by contributions from Nissan and Volvo, however, and Renault said that its operating performance had been hit by rising raw material costs and a highly competitive European market.

Copyright AFP

Subject: French news

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