Renewing Renault: its plans for 2009
9 February 2006

Carlos Ghosn, boss of Renault and Nissan, has announced the French manufacturer's vision of where it wants to be in 2009. Given Mr. Ghosn's record, this plan demands some attention.

The three key elements to it are making the new Laguna (due next year) amongst the top three in its class for quality – both the car’s and the service network’s; achieving an operating profit margin of 6 per cent in 2009; and selling an extra 800,000 units in 2009.

Renault’s profit margin in 2004 was 5.1 per cent, so this might not seem like too much of a task. But last year saw a slide in profits – it issued a profit warning – and sales in critical segments slid; the Mégane being down 24 per cent October-October. The subtext, and it’s not too far below the surface given Mr. Ghosn’s twin responsibilities as head of Renault and Nissan, is that Renault’s profits were half of Nissan’s in 2004.

This plan aims to make Renault not just more profitable, but the most profitable European volume manufacturer. This can’t happen without new models, and there will be plenty of those, with an average of eight models a year streaming out between 2007 and 2009. Most interestingly of all, fully half of these will be expansions into new sectors: SUVs, 4x4s, crossovers.

That's 13 new cars and 13 replacement cars over the next three years, five of which will be what the French classify as 'haut de gamme' - top of the range cars. So one element of the plan is clearly to attempt forays upmarket in a more successful fashion than La Régie has managed in the past. But it has been here before with the sales disasters of the Vel Satis and Avantime.

Fuel also forms a key part of the plan: Renault claims that by 2008 it will sell a million cars a year emitting less than 140 g/km of CO2, and one third of those will emit less than 120 g/km. For comparison, it sold 2.5 million cars in total in 2005.

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Also of significance is the claim that 50 per cent of its petrol-powered engines on sale in Europe in 2009 will be able to run on an ethanol-petrol mixture; 30 per cent of its diesels will be able to run on biodiesel. There is also a promise to work with Nissan on alternative sources of power – Renault says it will test fuel cell vehicles in France by 2009.

If there’s anyone to cut costs (purchasing costs are to be cut by 14 per cent in three years; manufacturing costs by 12 per cent; logistics costs by 9 per cent; distribution costs by 8 per cent per unit) whilst spending wisely (research and development investment will not exceed 11.5 per cent of revenues; administrative and general costs will go down from 5.1 per cent of revenues to under 4 per cent), it’s Mr. Ghosn.Whether he can do it in bureaucratic France whilst commuting between Paris and Tokyo remains to be seen.

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