PARIS - Renault says it is getting huge benefits from a FF20 billion ($3.6 billion) cost-cutting program it launched last year. Some results of the three-year effort were detailed in a Renault internal newspaper.
Eight teams - including engineering, logistics and personnel experts - were set up in spring 1997 to study areas where savings could be achieved.
In October, the eight working groups presented results to Renault Chairman Louis Schweitzer and Carlos Ghosn, executive vice president in charge of engineering, manufacturing and purchasing.
Among their findings:
Warranty costs can be cut by FF260 million through improved quality. Claims cost Renault FF2.4 billion annually.
The same engineering study was often being carried out by both Renault and a supplier. The elimination of so-called 'doubling' will save FF100 million in 1998. The savings will rise to FF500 million by the time the cost-cutting program ends in 2000.
Tightening up parts specifications to avoid retooling will save FF1 billion this year and FF2 billion by 2000. Renault estimated that an extra FF2.5 billion a year could be saved by simplifying specifications.
Renault plans to standardize components as much as possible. On the Megane range this led to savings of FF500 million. For example, the number of different fasteners used has been cut from 598 to 185. Applying component standardization throughout the Renault range would give savings of more than FF2 billion.
Improvements in management of buildings and property are an area of big potential savings. Renault's entire real estate covers 12 million square meters and costs an annual FF7 billion to operate and maintain. Renault plans to sell off some old sites and slash building maintenance costs by 30 percent.
Renault originally targeted a 25 percent reduction in parts delivery logistics costs by 2001.
But, according to Avec, the Renault newspaper, 'it will be difficult to reach such a goal since logistics - a very expensive operation in the auto industry - have already been optimized.' The new target is a 17 percent cut by the end of 2000. Among the planned the improvements are locating more suppliers near assembly plants.