Renault Downsizing

The previous CEO Carlos Ghosn believed the best way forward was an aggressive sales push, which lifted sales and kept factories better utilitsed. It certainly seemed to have success while the world car industry was growing. It kept car plants open in France while at the same time minimising the negative effect of excess capacity that it has in its domestic manufacturing sites.

On his sudden departure, that strategy was quickly replaced with less emphasis on volume and moving to increased unit profit. That is a less risky business plan but created a huge issue; what to do the all the manufacturing plants in France that would be even less efficient.

Renault plans is to reduce its global workforce by 14,600, including 4,600 jobs in France. Much of this could be achieved through early retirement and other such similar ways. However, the car plant situation is still one yet to be explained by the company. European politicians know that any such closures on their watch could prove costly come election time. The French public generally view it as unacceptable, regardless of the cost.

Closing plants down elsewhere and move production back home is the way to go apparently. Assembly plants outside of France are in lower wage countries and in many cases where you need to manufacture to avoid import duty. This seems a no win scenario for Renault. Close French car plants and all hell will break loose back home. Moving large amounts of production back to France will cost it competitiveness.

French production capacity is so underutilised, something may have to give in that area. Models such as the Scenic, Espace and Talisman may be culled. The number of platforms within the Renault Group will be reduced and increased sharing with Nissan/Mitsubishi will also improve efficiencies. The latter will take time and in these trying times Renault needs to move quickly or else fall hopelessly behind the competition. French idealism will be the biggest hurdle the company has to face.