Carlos Ghosn as CEO of Nissan and Renault: Can He Rework the 'Nissan Magic'?
Renault - The French Automaker
Renault was a state owned government enterprise since 1945. It was started as a motorized vehicle assembler in 1898. Renault built trucks, airplane engines and heavy vehicles during the World War II and after the war and with the economic boom, Renault achieved high volume sales with its low cost cars like 4CV, Renault 4 and Renault 5 through the 1970s and 1980s. During early 1980s, Renault expanded into US by acquiring half the shares of American Motor Corporation. However, the deal was unprofitable and the company had to withdraw from the market in 1987. A similar deal failed in Mexico, and with both the deals financed through debts, Renault was left with huge debts accumulated by the end of 1980s. It reported losses of $3.5 billion between 1984 and 1986. Further, because it was a state owned business, obligations with labour unions led to more costs for the company.
|
When Louis Schweitzer joined Renault in 1986,Renault had accumulated debts to the tune of $9 billion
and was in huge
losses. Its proposed merger with Sweden based ABVolvo in 1993 failed due to unfavorable French political climate
and with
Swedish shareholders expressing reservation. The company continued to be in losses till 1996,when Schweitzer brought
in Carlos Ghosn as the executive vice president. Under the duo, product quality was improved, outsourcing secondary
activities and overheads were reduced along with reduction in workforce. The same time, French government started
setting ground for its IPO when Louis Schweitzer discovered that privatization of the company could only save it. In July
1996, the IPO was completed. By 1998,with the midsize model Scenic, Renault was successful in European market and in
1998 alone it made profits of $1.4 billion from$40 billion sales. 16
|
|
After the alliance, Renault managed to reduce its launching and warranty costs for new product introductions by recruiting managers from Nissan to undertake the launch. At the same time, it sent its employees to Nissan to oversee manufacturing, to achieve cost efficient production. Later Renault acquired Samsung Motors in South Korea and Roman automaker, Dacia as part of its international expansion. With the launch of multi purpose vehicles, Laguna II and A van time in 2001 and Espace IV in 2002 , and after its
association with Formula One racing between 1992 and 1997, its brand popularity improved.
By 2004,Renault held strong foothold in European market and reported a 6.5%increase in sales by the first half of 2004
and was the fourth largest auto company in the world. It held nearly 11%market share in Western European market in
passenger car and light vehicle cars. At the same time, Renault performance in large cars
segment was sluggish and was
struggling to achieve operating margin of 4%, when the demand for cars in the European market was low. Some of the new
launches like the Vel Satis, a tall saloon luxury model, were not very successful in the market.
Are launch in the US market
was also underway. Renault was facing other challenges along with Nissan and other automakers. Environmental friendly
cars, which seemed a likely potential opportunity, were costly to manufacture at the price the
customers were ready to pay.
Renault was planning for expansions in Chinese market and South Korea and other parts of Asia through alliance with
Nissan.
16]"For Renault, a new chance to take on the world", www.businessweek.com, November 15th 1999
