Philippe Gamba, Renault senior vice president, market area Europe, was interviewed by Georg Auer at the Paris auto show about the company's European dealer network strategy.
How will you reform your European distribution?
We have not done not enough in distribution in the past 40 years because all our efforts were concentrated on cutting engineering and production costs.
We are now concentrating on our network, giving each dealer a bigger market area so that he gets economies of scale, he cuts costs and we get more control.
This way we can have a higher standard of hardware and software for the customer, and we can set higher standards for treatment of customers.
We have done that in the UK. We reduced the number of dealers from 350 to 200.
In Italy we had 320 and now we are down to 250. In Spain we had 380 and we have cut that to 220.
What about Germany?
Germany is the one exception. The German market is very fragmented and Germans like to be close to their shops. The dealers there are very close to their customers and people are not used to big concentrations of commercial power. Because of that there is great resistance to concentration in Germany. In the long term it will change. But it will come later.
Today we have around 600 dealers in Germany. We say that we want to go to 550.
But we want to raise our market share to 7 percent and we don't want to disturb that by making other moves. So we are waiting for the others, like Ford and Opel, to act.
Austria and Switzerland are different: They are small countries with a lot of mountains. We are doing it very slowly.
In Lausanne we had two dealers. We asked one to buy the other out to have just one with two dealerships. That creates economies of scale. In Austria, too, if we see that one dealer could take over another dealership we will help him to do that.
How can you motivate dealers with this uncertainty hanging above their heads?
That is life. We had bad dealers for too long. We will not accept that any longer, because the customer does not accept it.
It used to be much simpler to be a dealer. But now that the customer is much better informed, he demands more from the dealership.
If the dealer is not good at managing and orienting toward the customer he will not make money and go out of business.
What about rebates? How can customers believe cars are priced fairly if they get rebates of 12 to 15 percent?
Take the UK. There we had dealer margins of 17 percent. Now it is only 12 percent. So customer discounting has decreased. In the end everybody was better off.
In Germany, Austria and Switzerland the dealer margin is too high. And because it is too high, the dealers make too much money and give discounts that are too high.
So everybody gets discounts that are too high.
When we introduced the Twingo we had fixed prices. And it was a success for one year. But we could not carry on with this because we then had the government scrapping incentives.
Actually, when we lower the dealer margin we lower the discount and the dealer makes money again.
What technical means do you use at Renault to reduce distribution costs?
We work on the logistics. We might have to reduce part centers. We have to reduce the stocks of parts at the dealers.
Everything depends on logistics to lower distribution costs. If you have a better organization in the country you can cut costs.
We will reduce all the data positions for all of Europe; we will centralize all the accounting for Europe; all the back offices will be centralized.
That will save money. We will unify all the programs.
We will centralize advertising costs by centralizing the artwork.
Fewer dealers means less competition and lower costs between the dealers of the same brand.
It is a matter of many small steps, day to day. We have no fixed, ready-made solutions.
What effects do you expect from the Euro?
There will be fewer discrepancies in pricing. Governments will have to coordinate taxation. It is up to the European governments.
They should understand that when more cars are sold because of lower taxes they will get more money.