Renault President and Chief Executive Officer Carlos Ghosn announced “Renault Commitment 2009,” a three-year growth plan intended to make Renault the most profitable European volume car company.
An “unprecedented” product offensive (26 new products) will widen the Renault lineup in four directions: renewing its current core products; developing a luxury range; entering new segments; and growing in markets outside of Europe. Given current market conditions, a key element of the strategy is a focus on low CO2 technologies and biofuels.
In response to growing concerns over greenhouse gas emissions and climate change, the EU has set an ultimate goal of 120 g CO2/km by 2010 at the latest for new cars. Average CO2 emissions for European cars in 2003 was 163 g/km.
The European, Japanese and Korean car manufacturers’ associations committed to an interim goal of reducing CO2 emissions to 140 g/km by 2008/2009, although it seems likely that the target will not be met. (Earlier post.)
In terms of fuel economy and CO2 emissions reduction, the Renault lineup is among the most efficient in the world today. The company’s objective is further improvement. By 2008, Renault will sell one million cars emitting less than 140 grams of CO2 per kilometer, of which one-third will emit less than 120 grams.
In addition, 50% of gasoline-powered engines for sale in Europe in 2009 will have the ability to operate with a mixture of gasoline and ethanol. By the same date, all diesel engines will be able to operate with 30% diester [B30 biodiesel].
Within the [Renault-Nissan] Alliance, Renault is preparing a full range of alternative technologies, such as hybrids, fuel cells and electric vehicles. In France by the end of the plan, Renault will test fuel cell vehicles equipped with the latest Alliance technologies. As the current European safety leader, Renault will continue to innovate in this field to strengthen its leadership position.—Carlos Ghosn
One million cars emitting less than 140 g CO2/km in 2008 would represent about one-third of projected sales. Furthermore, the use of biofuels would apply to reducing the automakers’s carbon numbers.
Overall, Ghosn is making three primary commitments:
To position the next Laguna, which will be launched in 2007, among the top three models in its segment in terms of product and service quality;
To sell an additional 800,000 units in 2009 as compared to 2005—a 32% increase; and
To achieve an operating profit margin of 6% in 2009.
The product plan will lead to an rapid acceleration of vehicle launches. In addition to the two launched in 2006, Renault will launch an average of eight models each year from 2007 to 2009—double the number launched from 1998 to 2005.
We expect the total industry volume of the mature markets, such as Europe, to be stable at best. We anticipate high energy costs, high raw material costs, rising interest rates and brutal competition. In short, the environment will not be favorable.
Renault is not in crisis, but Renault remains fragile. And without a strong response in the right direction to make its performance more robust, its vulnerability could lead to a more dangerous, and therefore unacceptable, situation.
Renault Commitment 2009 means everyone in Renault commits.
In 2005, Renault sold 2,533,000 units—the first time it cracked the 2.5-million unit mark—with record net income €3,367 million and an operating margin of 3.2%.
When we look at the positioning of the main global automakers, we can see that the average operating profit margin is 3.6% in 2005. On the one side are the winners—those that make more than 6% operating profit and grow their market share. On the other side are those that destroy value, with operating profit margins less than 2% and losing market share. Renault is in between.
Since 1999, our results have fluctuated between these two camps. Widening our product range and extending our geographic base of profitability will allow us to significantly reduce these fluctuations. Our ambition is to remain consistently among the winners.