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Renault CEO Prods Staff to Emulate French Peer’s Cost Discipline

Renault’s new CEO warned employees he might have to cut costs beyond the 2 billion euros already planned.

Renault CEO Prods Staff to Emulate French Peer’s Cost Discipline
Luca de Meo speaks during a conference in Barcelona, Spain. (Photographer: Angel Garcia/Bloomberg)

Renault SA’s new chief executive officer warned employees he might have to cut costs beyond the 2 billion euros ($2.4 billion) already planned and called for the carmaker to emulate arch-rival PSA Group for the next half decade.

While the savings plan announced in May was a “first solid step” toward competitiveness, CEO Luca de Meo wrote in a memo seen by Bloomberg News that Renault may have to lower expenses further through 2022. The auto-industry veteran hired away from Volkswagen AG earlier this year also said the French company needs to shrink its product range by 30% and revise supplier agreements.

A Renault spokesman confirmed the memo was circulated and declined to comment further. Reuters reported on it earlier.

In a surprising reference to its direct competitor, de Meo held up PSA and its journey from severe financial distress to one of Europe’s most profitable carmakers as a model to follow. Peugeot and Citroen should be used as templates for Renault and Dacia, he said.

“Despite our handicaps, we can be inspired by their strategy and follow the same path, at least at the beginning,” de Meo wrote. “This has to be a discipline and an obsession.”

The CEO officially took the reins in July just before Renault reported a record 7.3 billion-euro first-half loss due to the pandemic and mounting woes at its partner, Nissan Motor Co. While de Meo has promised a strategy plan at the start of next year, the memo offers the first broad overview of his vision for the carmaker and comes less than a week after he unveiled plans for a new brand-focused corporate structure.

In language likely meant to jolt workers, the CEO wrote that Renault is in the “red zone,” with Covid-19 strongly affecting results this year and contributing to “alarming” forecasts for cash positions.

“Let’s be truthful, Renault is not used to generating profit in a lasting and solid way,” he wrote. Results and sales are down and even new models aren’t profitable enough, he said.

De Meo also offered some insight into how he views Renault’s three-way alliance with Nissan and Mitsubishi Motors Corp., a partnership that has been severely tested following the 2018 arrest of former leader Carlos Ghosn. The CEO said he favors cooperation, especially in areas like research and development and optimization of each company’s geographic footprint.

“I am determined to do everything to make it a success,” de Meo said, adding that Renault shouldn’t blame Nissan for its difficulties, nor count on the Japanese carmaker to resolve them because it has “the same ones.”

More Highlights:

  • Critical European activity is weakening even as Renault pulled out of China for passenger cars; India not working well
  • Renault is vulnerable due to a too-large brand portfolio aimed at market segments that aren’t profitable, which has led to a dependence on its financing arm and after-sales service
  • Between 2023 and 2025, Renault needs good performance in C-segment vehicles with price increases and proper positioning in the electric-car market
  • Renault’s Alpine A110 needs a “Porsche 911 program” to spawn a small series of electric cars
  • An electric car costing less than 20,000 euros is key

©2020 Bloomberg L.P.