Renault SA Chairman Louis Schweitzer was interviewed in Paris on 23 October by Automotive News Europe staff reporter Stephane Farhi
Schweitzer, 55, joined Renault in 1986 after a career in the civil service. He served as head of the finance division before being named chief operating officer in 1990. He succeeded Raymond Levy as chairman and CEO in 1992.
Renault's registrations in France have fallen 24 percent this year, although you have been very successful with the Scenic small minivan. How do you assess Renault's position in the French and European markets?
Our sales have declined in Europe as a whole, but in every country outside France they have increased significantly. We should end 1997 with a 27 percent market share in France (compared to 26.6 percent in 1996) and a 10 percent share in Europe (10.1 percent in 1996).
However, there is no reason to think that a recovery will not occur some time in France, as it did in the UK. Italy is now experiencing a boom caused by government incentives. Therefore, we think that the European market will become better balanced.
How can you be less dependent on the ups and downs in the different European countries?
We can do three things. The first one is forgotten at times - the quality of our cars must be the best in Europe. We've now reached that top level and we must stay there. The second is our ability to make innovative products. The Scenic minivan is a case in point. Also, the latest version of the Espace minivan shows that we can stay at the leading edge by constantly improving an existing product.
Moreover, when you are the first to introduce a new product you can retain an advantage even after competitors launch similar products. Just look at Chrysler or GM in the US market. The new Kangoo family/leisure vehicle is a credible mix of passenger car and commercial vehicle.
Third, Renault historically was a low-cost manufacturer. It's now about average, but it must strive to be among the cheapest. Our plants were too scattered, which was a handicap. However, we have an advantage because our French production base is cheaper than other European countries, except Spain.
These three factors give us a strong base from which we can expand beyond western Europe. We do not expect a dramatic increase in our European market share, which will remain around 10-11 percent.
What are your sales goals for 1998?
The French market should slowly recover. Therefore, a forecast of 1.9 million registrations does not seem unrealistic. In Europe, the growth should continue, so we should see again the same levels as in the early 1990s.
The introduction of the new Clio will also be a major event for Renault next year. Both the Megane hatchback and Scenic models are doing nicely. Consequently, our performance next year should be better than this year. I also have big ambitions for the commercial vehicle market. We've lost our leadership, but we should regain it with our new products next year.
In 1998, Renault will open a new plant in Brazil. Production of the Megane wagon will start in Turkey. It seems that Renault is speeding up its internationalization.
Before 1992, international development was not Renault's top priority. We had to readjust in Europe because our position outside France was weak.
That was intolerable at a time when the European market was unifying. But that strategy was not compatible with expansion outside Europe.
I think that we have now a more balanced position in Europe. Therefore, we have begun to focus again on international prospects. For this purpose, we rely on our latest models, especially the Megane in its different versions, and on products yet to come.
You have just signed a letter of intent with the City of Moscow to build Meganes at the Moskvich plant. What are your ambitions in Russia?
Our international development clearly targets countries which are taking off - like Argentina, Brazil and Turkey. We have the technical and financial capability to run a second major project after Brazil. We always find foreign partners for such projects to limit risks.
Russia is a very promising market. There is much to do there. There is a huge, impressive appetite for consumption, as in the former East Germany after reunification. This means that strong market growth will occur. Therefore, we must become a local manufacturer and we want to manufacture a world-class vehicle there. We target production of 120,000 passenger cars eventually and a market share of 8-10 percent.
Do you think that a public body is the best business partner?
When you look at the local situation, having the City of Moscow as our partner is meaningful. This partner is a major political and economic player in Russia because it holds a majority stake in Moskvich. Also, Moscow accounts for 40 percent of the Russian car market. I remind you that in Brazil we have a partnership with a public body, the State of Parana.
Renault cooperates with General Motors on light commercial vehicles, Matra on the Espace and PSA/Peugeot-Citroen on engines and gearboxes. Will you expand these partnerships or make new ones?
We do not plan to cooperate with a competitor on a passenger car in our main product range. But I'm convinced that we can do a lot more on components. That includes engines and gearboxes, with either competitors or suppliers. PSA is a natural partner for us and I hope that we can cooperate even more.
Outside Europe, it is more complex. Partnering becomes more difficult.
In South America, two joint ventures (Ford/Volkswagen and Fiat/PSA) broke down recently. But we think we can convince common suppliers to come with us into new markets.
Could your ties with General Motors be extended to countries outside Europe?
Why not? There is no taboo in this matter.
What's the state of Mack Trucks, your US subsidiary?
Mack Trucks is earning money and gaining market share. On the contrary, Renault VI (commercial vehicles division) will lose money in 1997, even if its losses are shrinking.
It should be profitable again in 1998. The problem lies with the truck market in Europe, where prices are tumbling.
If Toyota builds its second European plant in France, what effect will it have on the French car industry?
I don't think the country they choose will make much difference in terms of market share. Obviously, if Toyota sets up a new plant, it will add to overcapacity in Europe. The market situation will be a little more difficult than before.
What effect has the closure of Renault's plant in Vilvoorde, Belgium, had on the company?
Closing down Vilvoorde was not easy, but it was not the first time that Renault closed a plant. Billancourt (outside Paris), Creil in France, Setubal in Portugal were shut down or sold. But Vilvoorde has been a watershed. Everyone realized that the umbilical cord with the French state has been severed and that the company cannot escape market constraints. The shock has been positive. You should not believe that Vilvoorde is our only effort to slash costs. But as a symbol, Vilvoorde is very significant.