After Nissan announced recently a drastic plan to cut costs, another member of the alliance is presenting several restructuring measures that will have a major impact. In a bid to achieve savings of more than €2 billion (£1.8 billion) over the next three years, Renault will gradually eliminate almost 4,600 jobs at home in France. Outside of its domestic market, the company aims to reduce its workforce by more than 10,000 employees.
The downsizing measures will also involve reducing annual car production capacity from four million vehicles in 2019 to 3.3 million by 2024. The Alpine A110’s future is up in the air as Renault says the Dieppe plant where the mid-engined sports car is built will be reconverted after production of the French Cayman rival will end.
Gallery: Alpine A110S (2019)
Additional savings will be made through streamlining vehicle design and development by working closely with alliance partners Nissan and Mitsubishi. In addition, the planned production capacity increase at the factory in Morocco and Dacia’s plant in Romania has been suspended. Renault’s car output in Russia is being analysed for a potential decrease, while worldwide production of gearboxes will also be rationalised.
Renault will reorganise its Flins factory in France where the electric Zoe and the Nissan Micra are assembled. The R&D centre in Guyancourt will also go through some changes in the coming years as part of the plan to optimise costs. The Douai and Maubeuge plants will focus on electric vehicles and light commercial vehicles.
Contrary to recent reports, the company is not saying anything about potential model cuts. For the time being, the allegedly endangered models – Scenic, Espace, Talisman – are safe. As to whether the MPVs and midsize saloon will get a next-generation model, that’s a different story.
While the main idea behind this restructuring plan is to save the company money, implementing the measures won’t be cheap. Renault says it will cost an estimated €1.2 billion (£1.08 billion) to get the job done.
The full list of measures can be accessed in the press release area below.
GROUPE RENAULT PRESENTS ITS DRAFT PLAN TO REDUCE FIXED COSTS BY MORE THAN 2 BILLION EUROS OVER THREE YEARS
The objective of reducing fixed costs by more than 2 billion euros over 3 years aims to restore the Group's competitiveness and ensure its long-term development within the framework of the Alliance.
The draft plan is based on the efficiency of operations within Groupe Renault: by simplifying processes, reducing the diversity of components within vehicles and adjusting industrial capacities.
The planned changes will be implemented in consultation with the social partners and local authorities within the framework of an ongoing dialogue.
Boulogne-Billancourt, May 29, 2020 – As promised when it announced its annual results, Groupe Renault today presents its transformation plan, which aims to achieve savings of more than €2 billion over three years and to lay the foundations for a new competitiveness.
The difficulties encountered by the Group, the major crisis facing the automotive industry and the urgency of the ecological transition are all imperatives that are driving the company to accelerate its transformation.
The draft plan will strengthen the company's resilience by focusing on cash flow generation, while keeping the customer at the centre of its priorities. It is based on a more efficient approach to operational activities and rigorous management of resources.
Beyond this, the draft plan aims to lay the foundations for Groupe Renault’s long-term development. In France, the Group would be organized around strategic business areas with a promising future: electric vehicles, LCVs, the circular economy and high value-added innovation.
These major regional centres of excellence based in France would be at the heart of the Group's recovery. In Flins and Guyancourt, the Group would reorganise its activities.
If Groupe Renault plans to make the necessary workforce adjustments to enable a return to profitable and sustainable growth, it is committed to ensuring that they are carried out through exemplary dialogue with social partners and local authorities.
This workforce adjustment project would be based on retraining measures, internal mobility and voluntary departures. It would be spread over three years and would concern nearly 4,600 posts in France, to which would be added the reduction of more than 10,000 other positions in the rest of the world.
The project includes the following main elements:
- Improving efficiency and reducing engineering costs, by taking advantage of the strengthened assets of the Alliance, approximately €800 million:
- Streamlining vehicle design and development: reducing component diversity, increasing standardization, Leader - Follower programs within the Alliance.
- Optimization of resources: concentration of the development of strategic technologies with high added value in the engineering sites of Ile-de-France; optimization of the use of R&D centres abroad and subcontracting; optimization of the means of validation through the increased use of digital.
- Optimization of production saving approximately €650 million
- Acceleration of plant transformation through the generalization of Industry 4.0
- Process improvement in new engineering projects: accelerating digitalization and "design to process".
- Right sizing of industrial capacities:
- Global production capacity revised from 4 million vehicles in 2019 to 3.3 million by 2024 (Harbour reference).
- Adjustment of production headcount.
- Suspension of planned capacity increase projects in Morocco and Romania, study of the adaptation of the Group's production capacities in Russia, study of the rationalization of gearbox manufacturing worldwide.
- In France, four working hypotheses for optimizing the production will be the subject of in-depth consultation with all stakeholders, in particular the social partners and local authorities:
- Renault is launching a consultation process on the Douai and Maubeuge plants to study the creation of an optimized centre of excellence for electric vehicles and light commercial vehicles in northern France.
- Open reflection on the reconversion of the Dieppe plant at the end of the production of the Alpine A110.
- In Flins, the creation of a circular economy ecosystem on the site, including the transfer of Choisy-le-Roi's activities.
- At the Fonderie de Bretagne, Renault is launching a strategic review.
- At the Fonderie de Bretagne, Renault is launching a strategic review.
- Increased efficiency of support functions, approximately €700 million
- Optimization of general and marketing costs: digitalization to optimize marketing costs, rationalization of the organization and reduction of costs related to support functions, etc.
- Refocusing activities for a better allocation of resources
This refocusing on the Group's core business through a change in its scope would concern in particular:
- Part of the RRG integrated distribution network in Europe.
- The transfer of Groupe Renault's stake in Dongfeng Renault Automotive Company Ltd (DRAC) in China to Dongfeng Motor Corporation and the cessation of Renault branded passenger car combustion engine activities in the Chinese market.
These plans will be presented to employee representative bodies in accordance with applicable regulations.
The estimated cost of implementing this plan is in the order of €1.2 billion.