Renault Group Reveals Its 2016 Plan – Largely Outside Europe

AutoInformed.com

As part of the cost cutting, shared platforms proliferate with 80% of models launched between 2014-2016 based on designs shared with a partner.

Carlos Ghosn, CEO of the Renault Group (RNO.FR), unveiled a five-year plan this morning in Paris that he said would accomplish two goals – growth and cash flow.

“We are aiming for sales of over 3 million vehicles in 2013,” Ghosn said, while talking about Renault’s first long term plan since he rescinded a previous one in 2008 as global markets collapsed and Renault went into survival mode during a near death experience.

The plan is heavily dependent on cost cutting, growth in emerging markets, and success of electric vehicles. In a statement that disappointed analysts, and sent the stock price down, Ghosn dismissed out of hand a merger with Nissan, claiming it was culturally impossible.  

Coming off 2010 final results that saw Renault returning to profitability of €3.4 billion, with an operating margin at 2.8% of revenues, better than the -1.2% loss in 2009, Ghosn said that over the next three years he is aiming for an accumulated operational free cash flow of €2 billion – with a target of €3 billion. This excludes dividends from Nissan, where Renault holds a 44% stake, as well as its 7% interest in Swedish truck maker AB Volvo, and 1.5% piece of Daimler.

Nonetheless, Ghosn said that as the result of alliances the cost of Renault’s vehicles will fall by at least 4% annually, even accounting for improvements and regulations. This means a 12% decline by 2013, with a goal of 15%. Caveat here – this excludes raw material price changes, which in theory all makers face to roughly the same degree.

As part of the cost cutting, shared platforms will proliferate.  A new C/D platform will be shared with Nissan for mid- and upper-range models, leading to the production of 1.5 million vehicles a year. Renault and Daimler will share a small A platform to build future Twingo and Smart models. Renault’s light commercial vehicle platforms will use components or processes from Nissan and Daimler.

The upshot is 80% of the models launched between 2014 and 2016 will be based on a platform shared with a partner.

To grow, Renault is also adjusting its industrial base and putting €5.7 billion ($7.9 b) investment into plants by 2013, largely in emerging markets. The impending investment shift is the latest blow to ailing European economies.

Renault said that there will be a lasting slump in the European market; in 2010 vehicle sales of 15.3 million were 20% lower than in 2007. Renault forecasts that by 2016 the market will remain below the pre-financial crisis levels of 2007.

Instead, automobile growth will be driven by markets outside of Europe:
• Sales in the BRIC countries (Brazil, Russia, India and China) have increased four-fold in the past ten years and now account for 1/3 of car sales worldwide.
• In 1990, 82% of new cars were sold in the United States, Europe or Japan. In 2007, the percentage was 62% and today, it is less than 50%.
• The non-European market is expected to expand by nearly 50% from 2010 to 2016.

Renault and rival French automaker Peugeot-Citroen, number three and two European automakers respectively, received loans of €3 billion from the French taxpayers in 2008 when global financial markets were frozen and vehicle sales collapsed. Each has since repaid €1 billion.

Renault said some more of the loan will be repaid this year and that it intends to surpass Peugeot as the Number two European automaker behind Volkswagen.

About Kenneth Zino

Ken Zino is an auto industry veteran with global experience in print, broadcast and electronic media. He has auto testing, marketing, public relations and communications expertise garnered while working in Asia, Europe and the U.S.
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