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Renault Acknowledges Ambitions Were Too Big, To Axe 15,000 Jobs To Reduce Costs


05/29/2020


Renault Acknowledges Ambitions Were Too Big, To Axe 15,000 Jobs To Reduce Costs
In a major strategy rehash, the French auto giant Renault announced a total planned job cut of about 15,000 in addition to reduction in production and restructuring of its French plants, as the company acknowledged that it had previously set global ambitions that were unrealistic. Analysts see this strategy change as an effort by the auto maker to banish the spectre of Carlos Ghosn.
 
Announcing the restructured strategy, Renault said that the changes will result in annual savings of about 2 billion euros ($2.22 billion) over the next three years as the company tries to negotiate a significant drop in global demand for cars which has been compounded by the novel coronavirus pandemic.
 
“We thought too big in terms of sales,” said interim Chief Executive Clotilde Delbos. He added that the company was “coming back to its bases” after making too much investments and incurring too high spending in recent years.
 
Even before the novel coronavirus pandemic had hit, the French carmaker was under pressure in terms of its profitability as the auto giant reported its first annual loss in a decade in 2019. The company had previously said that nothing would be “taboo” in its review of its scope of business.
 
Compared to the current volume of 4 million, Renault plans to reduce its global capacity to 3.3 million vehicles by 2024. This would result in the company focusing more on its profitable models and areas such as electric cars while completely halting its expansion plans in countries like Romania.
 
The lofty and aggressive global expansion plans for Renault, as well as for its Japanese alliance partner Nissan, were set by the Ghosn, the former boss-turned-fugitive who was arrested in November of 2018 in Tokyo over charges of financial misconduct. The charges have been refuted by Ghosn.
 
“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 plans to reduce costs of operations by bringing down the number of subcontractors in areas such as engineering and in the procurement of the car parts it uses, the company said. It also plans to reduce its operations of gearbox manufacturing worldwide.
 
While ruling out the current need for a rights issue, Delbos said that the company was close to finalizing a deal with the French government that would give it access to a 5 billion-euro French government guaranteed credit line.
 
Renault said that talks with the unions about the job losses were ongoing. Delbos said that the company would be closely reviewing the employee requirements at six of the 14 plants of the company in Francem even though most of the changes would be implemented after 2022.
 
French unions however expressed frustration at the announcement by the company.
 
“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.
 
(Source:www.financialpost.com)