New savings targets: Renault’s long journey out of the crisis

New savings targets: Renault’s long journey out of the crisis

The French carmaker Renault has had problems for years. Now the new CEO Luca de Meo has announced the transition to a technology group – and further savings.

“Renaulution” is what Luca de Meo, who has been CEO of Renault since July last year, calls his strategy to lead the troubled French carmaker back to success.

Behind the bumpy play of the words Renault and Revolution is a comprehensive contingency plan, with which de Meo wants to completely turn the car manufacturer upside down – towards more services and technology, but fewer cars. The goal is to reduce the number of cars produced annually from the current 5.5 million to 4 million.

20 percent of sales planned for services

The company, based in Boulogne-Billancourt near Paris, also aims to generate at least 20 percent of its revenues through services, data and energy trading by 2030. “We will evolve from an automotive technology company to an automotive technology company,” said de Meo, who worked for many years in the Volkswagen Group before joining Renault, most recently as head of Spain’s VW – Seat’s daughter.

In addition, the group should be profitable again as soon as possible. Renault recorded a record loss of around 7.3 billion euros in the first half of 2020, also due to the deep red numbers of its Japanese partner Nissan. Business data for the full year will be presented in mid-February. It is already known that worldwide sales of French vehicles fell by more than 21 percent in 2020.

“Last hope for Renault”

The situation with the car manufacturer is so serious that last year the company had to ask the French state for a guarantee for a loan of five billion euros. The appointment of the 53-year-old Italian de Meo raises high expectations in France. The Parisian daily “Le Monde” called it “Renault’s last hope”.

When De Meo presented its targets, it had no doubt that the austerity measures announced last year needed to be tightened. According to this, Renault should reach the savings target of two billion euros set by 2022 faster. Costs are expected to fall further – by € 3 billion by 2025.

15,000 jobs will be lost

This is associated with the closure of plants and the loss of 15,000 jobs, of which 4,600 in France. Investment in research and development is to be reduced from ten percent to less than eight percent by 2025.

Overall, Renault, like its Japanese partner Nissan, must avert an expansion driven by killed CEO Carlos Ghosn. Instead, more attention needs to be paid to return.

De Meo already took a new course when he took office: “Profitability instead of volume” – that means selling fewer vehicles, but at a higher price. Two dozen new car models planned for 2025, including at least ten purely electric vehicles, should contribute to this.

Mark James

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