PARIS -- Renault SA CEO Carlos Ghosn agreed to make development of upscale cars for French factories a "priority" as the government steps up its influence in the wake of a botched spy investigation.
Renault named Carlos Tavares as Ghosn's deputy late Monday. The French state, the carmaker's biggest shareholder with a 15 percent stake, made support for the appointment conditional on strategy changes, including taking a stronger lead in its alliance with Nissan Motor Co., people familiar with the situation said.
"If it's this hard just to get your man in place, it suggests we'll see more, rather than less, government influence going forward," London-based Credit Suisse analyst Erich Hauser said. France is a "relatively small shareholder with a disproportionate say over strategy, which has to be a concern for other investors."
Tavares, 52, head of the Americas region for Nissan, will replace Patrick Pelata, who quit over his role in the dismissal of three executives wrongfully accused of espionage in a mishandled internal probe.
To gain state support for the appointment, Ghosn, who also runs Nissan, agreed to devote more time to Renault and boost French production, the people said.
Ghosn said he intends to be "more present in France from now on," in an interview published Tuesday in French daily Le Parisien and confirmed by Renault. The CEO will oversee development of models that are more upscale than its regular compacts. The company also plans to invest in Chinese factories and consolidate OAO AvtoVAZ as a "Renault subsidiary," he said.
Renault, which already holds 25 percent of AvtoVAZ, had previously said its alliance with Nissan would take a controlling stake in the Russian carmaker through a shared investment in an additional 25 percent holding. Renault owns 43.4 percent of Nissan.
Announcing the management changes yesterday, Renault said that improving competitiveness and "the development of sites in France will be a priority." The emphasis on larger, French-made models is at odds with Renault's recent sales growth, which has been underpinned by an expansion of the budget Dacia brand. A three-year plan unveiled by Ghosn in February called for further expansion of Dacia.
'Not looking for big'
The development of larger models also runs counter to shrinking demand for big cars, as environmental pressures steer consumers toward small, fuel-efficient vehicles, said Carlos Da Silva, a Paris-based analyst with IHS Automotive. "Even with the best models in the segment, your volumes would struggle because the market's just not looking for big cars from mainstream manufacturers," Da Silva said. "That's a very tricky equation for Carlos Ghosn."
French plants have to contend with the auto sector's third-highest labor costs after Germany and Belgium, according to data from Germany's VDA automakers' association. Workers in France are eight times more expensive than in Romania, where the Dacia brand is based.
Ghosn and Philippe Varin, his counterpart at PSA/Peugeot-Citroen SA, have repeatedly urged the government to improve the competitiveness of French car exports by reducing labor taxes.
Rather than a renewed push into upscale models, Renault's energy would be "better spent in emerging markets or finding the right size and structure in France," Credit Suisse's Hauser said. "They've tried it before, and the brand doesn't seem to support it."
As Ghosn increases his involvement at Renault, the No. 2 position will be slightly reduced from the full operational oversight the CEO had ceded to Pelata in 2008, one person said, adding that details of Tavares's responsibilities will be decided in the coming weeks.
Pelata stepped down as chief operating officer last month over his role in the January dismissal of three senior executives.
Tavares joined Renault in 1981 after graduating from France's Ecole Centrale and moved to Nissan in 2004 as program director for compact cars, rising to executive vice president the following year.
In his most recent role, Tavares cut global manufacturing costs by expanding production in Mexico and bid successfully for $1.6 billion in U.S. Energy Department funding for an electric-car battery plant.
Nissan chief performance officer Colin Dodge will replace Tavares as Americas chief, adding the region to his current responsibilities for Africa, the Middle East, India and Europe, the company said Tuesday.