Categories
Renault slash

Renault to slash 14,600 jobs as coronavirus wreaks havoc on auto industry – CNN

Hong Kong/London (CNN Business)Renault is slashing 14,600 jobs as part of a major overhaul designed to reduce costs and help the French carmaker survive the coronavirus pandemic. Some 4,600 positions will be eliminated in France, with 10,000 more in other markets.

The company announced Friday that it will cut fixed costs by more than €2 billion ($2.2 billion) over the next three years. It also plans to reduce the number of cars it makes each year from 4 million to 3.3 million by 2024, and will stop selling Renault-branded vehicles in China. The plan will cost about €1.2 billion ($1.3 billion) to implement, the company said.
Renault (RNLSY) is part of the world’s biggest carmaking alliance, alongside Nissan (NSANF) and Mitsubishi (MBFJF). Earlier this week, the companies announced they would make fewer models, share production facilities and focus on the existing geographic and technological strengths of each carmaker as they try to slash costs amid the coronavirus pandemic.
Renault said changes were needed because of the slowdown of the global automotive market, the scale of the economic fallout from the pandemic, as well as stricter emissions standards. The company was in trouble before coronavirus, reporting its worst financial performance in a decade last year, with net profit dropping 99% to just €19 million ($21 million).
“The Covid crisis has only aggravated an existing situation,” acting CEO Clotilde Delbos said on a call with analysts on Friday. “This adverse economic environment has shown the limits of our business model, which was betting on unprecedented market growth in emerging markets and therefore on record sales,” she added.
Shares in Renault are down nearly 50% for the year and the company is in discussions with the French government, which owns a 15% stake, over the terms of a €5 billion ($5.4 billion) loan. Under former CEO Carlos Ghosn, the carmaker pursued an aggressive expansion strategy, seeking to drive sales volumes through what Delbos described as a “diverse, complex and costly lineup.”
“We pay the price of this model today,” Delbos said. “Our ever increasing size and structural costs are set for growth that did not take place.”
Renault will cut costs across engineering, production, and sales and administration, she said. The company, which employs 180,000 people around the world, said it would consult with unions about restructuring some of its plants in France.
“The planned changes are fundamental to ensure the sustainability of the company and its development over the long term,” chairman Jean-Dominique Senard said in a statement.
Carmakers are in the midst of a painful decline globally, with sales falling in each of the past two years following a record 2017. The coronavirus pandemic has deepened the slump, upending an industry grappling with the huge challenge of switching from internal combustion engines to electric vehicles in order to tackle the climate crisis.
On Tuesday, French President Emmanuel Macron announced an $8.8 billion aid package for the country’s auto industry. Luca de Meo, who previously served as president of Volkswagen (VLKAF) brand SEAT, starts as Renault’s new chief executive on July 1.
The decision to pull the Renault brand out of China is part of the new alliance strategy, which will see each member take the lead in specific geographies while the others follow. Nissan will lead the way in North America, the Middle East and key markets in Asia including China and Japan. Renault will take first position in Europe and South America, while Mitsubishi has been assigned parts of southeast Asia and Oceania.
On Thursday, Nissan announced it is slashing production capacity by 20% and closing a plant in Spain as part of the overhaul.
— Charles Riley contributed to this report.

Read More

Categories
Renault restructure

Renault to restructure French factories in bid to slash costs – CNBC

Renault acknowledged that its global ambitions had been unrealistic, announcing plans to cut about 15,000 jobs, shrink production and restructure French plants as it pressed the reset button and sought to banish the specter of Carlos Ghosn.

Faced with a slump in demand that has been exacerbated by the coronavirus pandemic, Renault detailed plans on Friday to find 2 billion euros ($2.22 billion) in savings over the next three years.

“We thought too big in terms of sales,” said interim Chief Executive Clotilde Delbos, adding the company was “coming back to its bases” after investing and spending too much in recent years.

The French carmaker was under pressure even before Covid-19 hit, posting its first loss in a decade in 2019, and has said nothing would be “taboo” as it reviews its business.

It plans to trim its global capacity to 3.3 million vehicles in 2024 from 4 million now, focusing on its most profitable models and areas such as electric cars while freezing manufacturing expansion in countries like Romania.

Renault, like its Japanese alliance partner Nissan, is rowing back on an aggressive expansion plan pursued by Ghosn, its former boss-turned-fugitive, who is wanted on charges of financial misconduct in Tokyo. Ghosn denies the charges.

“The mindset has completely changed. The previous line was volumes and sales and being the first on the podium,” Delbos said. “We’re not looking to be on top of the world, what we want is a sustainable and profitable company.”

The company, due to bring ex-Volkswagen executive Luca de Meo on board as CEO in July, said it would cut costs by reducing the number of subcontractors in areas such as engineering and the number of components it uses, as well as shrinking gearbox manufacturing worldwide.

Delbos ruled out the need for a rights issue, saying Renault was close to sealing a 5 billion-euro credit line guaranteed by the French government. 

Renault shares were down by 6% during early afternoon trade on Friday. 

Third of cuts in France

Renault, which is 15% owned by the French state, faces the most sensitive restructuring measures in its home country, which will shoulder almost a third of the global job cuts and faces potential plant closures.

The carmaker said it was in talks with unions. Six sites out of Renault’s 14 plants in France – including a component factory in Brittany and the Dieppe factory where the group’s Alpine cars are made – will be under review, though most changes would take effect after 2022, Delbos said. 

Some of the six plants like the one in Flins, close to Paris, where it makes its electric Zoe models, could cease to assemble cars and center on recycling activities instead, the company said.

Speaking to CNBC’s Charlotte Reed on Friday, Delbos said the French government wanted to work alongside the company to ensure the “best solution possible” on the job reduction front, adding that no decision would be made until all of the options had been reviewed with the firm’s stakeholders.

“What we want to achieve is an excellent center in France in terms of electric vehicle production, light commercial vehicle production, in order to make sure that we can remain sustainably in France,” she said.

“Then on top of that by increasing the performance, we can attract some more partners. So if we can achieve that after discussion with the different stakeholders, I think the shape of Renault after this period is going to be even more attractive to everybody, including investors and employees.”

The government has said it will not sign off on the state-backed loan until management and unions conclude talks over jobs and factories in France. It is seeking further clarity on how some big factories will be reorganized and further guarantees on jobs before it gives the green light, according to a source familiar with the matter.

In all just under 10% of its global workforce will be affected by layoffs, and restructuring measures will cost 1.2 billion euros. There will be about 4,600 job cuts in France, though Renault said it would prioritize employment transfers, voluntary departures and retirement schemes.

French unions expressed frustration. 

“This plan is unbalanced, at the expense of French activities,” the moderate CFDT union said on Friday, adding that other countries had been less affected. 

Getting over Ghosn?

Renault is still struggling to move on from the scandal involving Ghosn, which strained its relations with alliance partner Nissan and paralyzed joint projects.

Ghosn, who ran Renault and was the chief architect of the alliance, was arrested in Japan in late 2018 on financial misconduct charges, but fled to Lebanon in December. He has denied wrongdoing and hit out at his past employers.

Renault and Nissan have been hit hard by the pandemic just as they were trying to rework their partnership. Nissan this week also outlined a plan to become smaller and more efficient. 

They were among the weakest global automakers going into the crisis, lacking a clear plan for using their alliance to emerge from the slump and share the burden of investing in electric vehicles and other technology.

—CNBC’s Chloe Taylor contributed to this article.

Read More

Categories
Nissan Renault

Nissan and Renault shelve merger plans to repair their alliance: sources – Reuters

(Reuters) – Renault (RENA.PA) and Nissan (7201.T) have shelved plans to push towards the full merger former leader Carlos Ghosn craved and will instead fix their troubled alliance to try to recover from the coronavirus pandemic, five senior sources told Reuters.

FILE PHOTO: The logos of car manufacturers Renault and Nissan are seen in front of dealerships of the companies in Reims, France, July 9, 2019. REUTERS/Christian Hartmann

Nissan has long resisted Renault’s proposals for a full-blown merger as executives felt the French carmaker was not paying its fair share for the engineering work it did in Japan, sowing discord that some feared could wreck the partnership.

Now, with carmakers around the world reeling from the pandemic, the partners are planning to overhaul an alliance that largely failed to convert its global scale into a competitive advantage beyond the joint procurement of parts.

Both struggling carmakers are set to announce mid-term restructuring plans this week that will serve as a peace treaty designed to resolve the long-standing tensions, the five people familiar with the overhaul told Reuters.

“After the rain, the earth hardens,” said one senior Nissan source, citing a popular Japanese proverb that means relationships become stronger after a period of strife.

All five sources within the alliance, which also includes Mitsubishi Motors Corp (7211.T), declined to be named because they are not authorised to speak with media.

Nissan and Renault are each planning substantial restructuring and cost cuts that could affect tens of thousands of jobs, with the Japanese company to announce its measures on May 28 and its French partner likely to follow the next day.

Before that, Mitsubishi, Nissan and Renault are holding a joint news conference on May 27 during which they are expected to outline the philosophy behind their new “leader-follower” approach to the alliance.

The sources said the companies were unlikely to disclose many details at the events this week of how the new approach will be used to share costs as the companies were still working on specific projects.

However, the crisis at both carmakers has accelerated efforts to resolve the disagreements that have stymied collaboration and cost-sharing in technology and product development for five years, the sources said.

Mitsubishi, Nissan and Renault all declined to comment officially about alliance plans.

‘LEADER-FOLLOWER’

The alliance has steadily ramped up output over the years, delivering over 10 million vehicles for the first time in 2017, the first full year after Mitsubishi joined the partnership.

But persistent quibbles over sharing the costs of innovation and new vehicle development soured relations and stalled plans to forge an even tighter alliance.

Nissan executives believe their engineers are substantially more productive than their Renault colleagues and the way the French carmaker proposed to combine technology and product development did not properly account for Nissan’s intellectual property, three of the sources said.

“Nissan engineers on average produced 40% more than their Renault counterparts in a given amount of time spent on a job,” one insider told Reuters in January.

After his arrest in 2018 in Tokyo on charges of financial misconduct, former alliance head Ghosn said his detention was part of a plot by Nissan executives to bring him down and block any merger.

Earlier this year, relations looked strained to a point where the 21-year alliance was at risk of collapse.

However, the turnaround plans due are now likely to be combined to forge what the sources described as a more equitable way of sharing technology and resources, while preserving the distinctiveness of the alliance brands.

Nissan Chief Operating Officer Ashwani Gupta and Renault Chairman Jean-Dominique Senard are both key advocates of the new approach that they’re calling a “leader-follower” system, the sources told Reuters.

The plan is for one company to lead the development of a type of vehicle or technology with the other following, taking a page out of the play-book Gupta used to revive Renault’s commercial vehicle business, as well as reinvigorate Nissan’s.

When he was in charge of the French business, Nissan used Renault’s vehicle architectures as the building blocks for its city delivery vans while Nissan in turn provided the Renault group with technology for pickup trucks.

OFF THE TABLE

A test of the new approach could come in a several places around the world, such as how Renault and Nissan work together in Europe and perhaps South America, as well as how Nissan and Mitsubishi cooperate in Southeast Asia and Japan.

Under the new working relationship, Nissan could take the lead in Europe on crossover sport-utility vehicles (SUVs), while operating as a “follower” in commercial vans and small city cars, using versions produced by Renault, the sources said.

Nissan’s factory in Sunderland in the United Kingdom is of particular importance, they said.

Renault and Nissan are planning to turn the assembly plant into a hub for sport utility vehicles such as Nissan’s Qashqai and Juke, and potentially their Renault counterparts, the Kadjar and Captur. The companies are working on the plans, though it’s not clear when a final decision will be made, the sources said.

Whether Renault vehicles could be built profitably at the plant is unclear, given the uncertainty over tariffs as Britain leaves the European Union, according to one of the sources.

“It should be a pure economic transaction, but it’s also likely a political decision, too,” he said.

In the Philippines, Mitsubishi will likely help make cars for Nissan as it already has a plant there while the two will beef up cooperation in Japan’s micro mini car business, which makes up about half the country’s passenger car market.

Slideshow (2 Images)

The latest effort to salvage the Renault-Nissan alliance comes at a time of rising global economic nationalism and protectionism that represent a risk to the partnership.

But for now, the new approach means the two companies will sideline any discussion of a complete merger, the sources said. Renault owns a 43.4% controlling stake in Nissan, which owns non-voting 15% stake in the French carmaker.

“Will merger talk be revived in the future? No one knows. Everybody has to be prepared for that. But as far as I know, it’s not being pursued anymore,” said one of the senior alliance sources. “It is totally out of our sight today.”

Reporting by Norihiko Shirouzu in Beijing; Additional reporting by Gilles Guillaume in Paris; Editing by Joe White and David Clarke

Read More