Renault SA Chairman Louis Schweitzer says he 'bet the farm' last year when he agreed to acquire a 36.8 percent stake in struggling Nissan Motor Co. for FF32.2 billion (E4.95 billion). Renault couldn't afford to let Nissan fail because it could bring down Renault, too.
But just one year after Nissan CEO and ex-Renault No. 2 Carlos Ghosn unveiled a radical revival and survival plan for the Japanese automaker, it has posted solid first-half profits, launched several new products, and appears ready to announce plans to build a second US assembly plant at a cost of $930 million.
Renault itself has not been dormant. It has turned itself into a multibrand group with the acquisition of local makers Dacia in Romania and Samsung Motors in Korea. And it has exchanged its truck division for a 20 percent stake in AB Volvo, the world's second biggest truckmaker after Mercedes-Benz.
Schweitzer spoke with Automotive News Europe's Stephane Farhi at Renault headquarters in Boulogne, near Paris, on October 11.
How will Renault do this year in western Europe?
We think Renault will remain the No. 1 brand if you include passenger cars and light commercial vehicles [Volkswagen is the No. 1 passenger car brand in western Europe]. However, we have revised our forecasts for the overall market. We now expect sales to remain unchanged, mainly because of the downturn in Germany, which remains difficult to explain. Besides this, higher oil prices and interest rates caused a slight slowing of orders in September. But in 2001 the European car market should rise again, especially because of a recovery in Germany.
Regarding Renault's performance, we have not launched new models this year, so it will be different for us in 2001. We have also suffered from a shortage of diesel engines. There is growing demand for diesels in Europe after years of stability.
So you don't think the present slowdown signals a shift in the market trend?
No, we don't.
Last May, you said Renault and Nissan were targeting a combined 17 percent market share in western Europe - 12 percent for Renault, 5 percent for Nissan. Do you confirm these targets?
Our long-term strategy is focused on profitable growth, which means we do not want one to come at the expense of the other. In western Europe, market shares cannot be expanded indefinitely. For Renault to go beyond 12 percent would be a daunting challenge. For Nissan to reach 5 percent would be similar to Toyota's target.
When we say we want to reach 4 million units in 2010 for Renault, including Dacia and Samsung, we also say that growth will come mainly from countries outside western Europe that eventually could make up half of the volume.
By 2010, the concept of western Europe will become irrelevant: Poland or the Czech Republic won't be different at that time from Italy, for instance. We have room for strong growth in such an extended European area.
Following the truck division deal with AB Volvo, do you think a carmaker necessarily must be present in the truck business?
The link is natural but not necessary. There are few commonalities, but it's the same underlying know-how when you consider technology, marketing, distribution and management.
I'm convinced the truck business has a significant growth capability compared to the car business, because road transportation will continue to grow.
There are two levels of truckmakers: global makers on one side, regional truckmakers on the other. Economies of scale will become critical because volumes are smaller in trucks than in cars.
That explains our deal with Volvo: We keep our presence in the truck business and we achieve global consolidation. We said we wanted to be a significant shareholder in Volvo but not to get control. We are not withdrawing from the truck business.
Renault last month introduced a new slogan for its global image campaign: Createur d'automobiles - or creator of cars. Why?
We kept the previous slogan - voitures a vivre (cars to live) - for 15 years. The new slogan underlines that we want to raise our brand image and that innovation is our core policy.
How are things going with Nissan?
The Renault-Nissan alliance has two pillars: Nissan's recovery, and cost and product sharing.
Regarding common platforms and powertrains, the horizon is 2010. We are preparing the first common platform, the B, to be followed by the C and a common engine.
Cooperation is already well under way in marketing and distribution. Renault and Nissan back each other in Europe, Japan, Latin America and Mexico. Nothing has happened yet in China or India, though. Some basic programs are making progress too, including purchasing and information systems.
We have stepped back in one area: We thought we would use cross-badging widely. We decided to limit it to light commercial vehicles because we think we should not have the same passenger car under different brands, precisely when we are trying to strengthen both brand identities.
When will it be relevant to consider Renault-Nissan as a group?
In the agreement between Renault and Nissan there is a so-called alliance chart, in which we say that the goal is to form a binational group. When you usually think of a group, like GM or Ford, you talk about a single anchorage. Renault-Nissan must act and behave like a group, with a common strategy, but with two bases, in France and Japan, and two cultures. In this respect, a group is opposite to unity.
This evolution can be continuous. But it does not necessarily need a constitutional reform.
Does it mean a change in the capital structure is not a prerequisite to going further?
No, it's not. We already behave as a group - we make common decisions, we implement common management methods. The only limit we have today is the priority given to Nissan's recovery within a three-year schedule. At that stage, one will see more accurately how the two companies will have converged.
How will you manage the Dacia and Samsung brands? Will you dedicate them to specific market areas, or to specific products and segments?
Dacia will be sold across a large territory, far beyond Romania. It is about value-for-money vehicles that are cheap, modern and reliable.
Samsung products will clearly be close to Nissan ones. Samsung must regain its rank in Korea with two models. Then, we can imagine that Russia and the Pacific coast of South America will become natural export markets.
Block exemption, the system that allows carmakers to control their distribution networks in Europe, is scheduled to end in September 2002. Do you fear this?
We are fighting along with our European colleagues to defend the block exemption system. I don't know what the final position of the European Commission will be on this subject. I'm convinced that if we do not prove that our distribution system is the best, it will be under attack. But to reach the customer, everything we do - from e-commerce to dealer consolidation - is necessary, whether block exemption remains or not.