By on March 19, 2009

Let’s say you have one of the most unproductive car factories in the world. Car research firm CSM Worldwide says it’ll run at 37 percent this year and possibly 31 percent next year. So what do you do? That’s right, you crank up production. This story just goes to show you how a bailout can be more of a hindrance than a help. Renault has no choice but to keep production at their plant in Sandouville running despite it failing catastrophically. This is because Renault accepted a €3B bailout loan from the French government. A loan which came with a caveat, “Keep production open at French factories!” And now . . .

Because of the worldwide recession and the push towards more fuel efficient cars, vehicles like the Renault Laguna and the Vel Satis (both of which are made at Renault’s plant at Sandouville) are going to be more redundant (unlike the factory staff). Which means Renault will have an excess of stock, which won’t do their finances any favours. Renault management are trying their best to entice staff to leave with generous rendundancy packages or offering them to work half time and receive 70 percent of their wages. But it just isn’t enough.

Whilst the government loans will help Renault in the short term, it won’t do them any good in the long run. After all, how does one cut costs, without cutting staff or closing factories? Cheaper parts on cars? As if Renault’s cars weren’t unreliable enough. Now, if Renault hand’t taken the loans, they would have been free to close the Sandouville plant, transfer what little production was left to a lower cost factory and make meaningful savings towards the long term life of the company. That kind of thinking has a name, what was it . . . ? Oh yeah, “free market economics.”

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21 Comments on “Renault: Beware of French Governments Bearing Gifts...”


  • avatar
    Cammy Corrigan

    no_slushbox

    No.

    The EU did try to force France to remove it (whether they were successful or not, I don’t know). But all the French Government did was strongly infer to the companies that production should be maintained in France. In the following link, in the 5th paragraph, President Sarkozy suggested that to secure aid, production had to be retained.

    http://news.bbc.co.uk/1/hi/world/europe/7897342.stm

    In the end, the result was the same. French factories were kept open.

    After all, they may need another loan very soon….

  • avatar
    superbadd75

    That is one ugly POS. WOW!

  • avatar
    frozenman

    What else would you expect Versa bones to be. butt ugly!

  • avatar
    menno

    Yes, the pictured car is the TOP OF THE LINE AUTOMOBILE for Renault. Their “luxury” car.

    It’s too weird even for the French…

    I always thought that American Motors final few nails in their coffin were because Renault (read: socialism) stepped in when talks with Peugeot (read: free market) were ongoing.

    Peugeot wanted to buy into AMC for the usual good business reasons; to share technology from small Peugeot front wheel drive cars (no longer sold in the US at the time; the late 1970′s); to expand their dealer presence in the US (AMC dealers could have sold up-market and diesel Peugeot cars as well as home-grown AMCs and small AMC badged Peugeot based cars built in Kenosha Wisconsin).

    Renault came in with more promises (lies) and essentially put stars in the eyes of the executives at AMC, by all accounts.

    The result was an epic fail.

    Renault is why I don’t think Nissan will survive to the year 2020.

  • avatar
    ConejoZing

    It’s hard to believe that the same person who runs Nissan runs this company (Carlos Ghosn). Uh and yeah the normal Golf and GTI pretty much destroy that Renault in the style department.

  • avatar
    no_slushbox

    Is the government assistance really why they aren’t closing this plant?

    I think that the European Union forced France get rid of the legal requirement that bailout recipients use the money in France.

    Most likely they are unable to shut down this plant because of French labor law requirements and French labor union contracts.

  • avatar
    Steven Lang

    If the rear quarter was smoothed out a bit, it would actually be pretty decent.

    If the French ever got their reliability and build quality in order, they could have taken over a substantial share of Volvos old clientele and targeted city dwellers with their smaller premium cars. Whether that would have been enough to make them profitable here is doubtful. But it would have enabled them to maintain a presence here in the States.

    I still think that they could enjoy limited success here by concentrating the dealer networks in city centers around the Northeast and West Coast. If only the import requirements would allow them to exploit those opportunities.

  • avatar
    AKM

    The Vel Satis was developed before Ghosn became president of Renault. I think it dates back from 2001 or something.

    Very, very ugly. Practical design, since it’s a sedan/hatch large car, years before the BMW PAS (or, POS, or whatever they’re calling it). But butt ugly. Never sold well, and the fact that it IS practical is almost detrimental at the price point they are supposed to sell.

  • avatar
    Robert.Walter

    Always prefered Renault’s mini-van platform based oddity the Avantime (came out about the same time and did dismally as well.)

    Menno (and everybody else): Regarding the Peugeot-/Renault-AMC experience: What parallels, differences are there to the ongoing Fiat-Chrysler experiment?

  • avatar
    hal

    On the other hand taking govt. cheese to keep that factory open for a while kicks the significant expenses of factory closure down the road to when it will be politically and economically easier.

    The French have always had difficulty developing luxury cars, but the quirkiness has always been part of the appeal.
    Maybe Ghosn should buy BMW to get the upmarket brand he needs

  • avatar
    menno

    Well, Robert.Walter, I guess I hadn’t considered that but you have a good point. There are lots of parallels between AMC+Renault 30 years ago and Chrysler+FIAT now.

    I’ve said it before, but is Jeep the “jinx” brand?

    American Bantam: First jeep concept (company was kaput after the war contracts finished – they were contracted for Jeep trailers, not Jeeps)

    Willys-Overland: Failed to flourish despite virtually no competition in the 4wheel drive light vehicle market AND having the contract to built Jeeps for the Korean War; was bought in 1953 by…

    Kaiser: Failed to flourish, quit building Kaiser and Willys cars by 1955 in the US (and quit with the very advanced Willys compact passenger cars one year before the Rambler compact really started to take off in the marketplace); was bought in 1970 by…

    American Motors: Failed to flourish, partially bought by Renault in 1979 then in 1987 bought by…

    Chrysler Corporation: Failed to flourish, in 1999 was bought by….

    Daimler Benz: Failed to flourish, giving up Chrysler and selling it in 2007 to…

    Cerberus: Failed to flourish.

    Any takers for the Jeep brand?

    FIAT? Where do you think you’ll be in two years if you “help” with Jeep / Chrysler / Dodge?

    Now that you mention it, perhaps Peugeot dodged a bullet!!!!!

  • avatar
    mtypex

    The Vel Satis is a joke, right? Nice name though.

    Renault is redundant in general – Peugeot and Citroën make much nicer designs.

  • avatar
    7

    Not that the Vel Satis ever sold well (btw – it’s more or less the size of BMW 5 serie) – even in France.

    The only successful model produced in Sartrouville is the Espace, which is in fact Renault’s current haut de gamme.

    You should have posted a picture of the Laguna 3 which is also quite awful. The first model sold quite well but had some reliability problems that prevented people to buy the newer one (sounds familiar ?). Trouble is the only Renault that sell quite allright are the smaller models (Clio, Megane) that are made outside of France (Spain, Slovaquia, …). It seems that Sarkozy was quite astonished when he heard that…

    One also shouldn’t underestimate the current social situation which is quite touchy (i.e. massive national strike today) so I guess Nicolas will pay for another round.

  • avatar
    Bimmer

    Was this thing (cant call it a car) designed by blindfolded people to transport people who have no taste? It should be nominated to be one of the ugliest vehicles of 21-st century! No wonder it doesn’t sell.

  • avatar
    7

    @ Bimmer:

    Sarkozy uses one…

    BTW Vel Satis stands for Vélocité Satisfaction – speed satisfaction in english.

  • avatar
    HEATHROI

    of course Sarkozy has one.
    Can you imagine the President of France being driven round in a German Car.

    Still it beats cowering inside a tank with Cadillac stickers on it.

  • avatar
    Landcrusher

    The only capitalists left in europe are in the east.

    PS. Heathroi,

    Have they always had a file on you at Treasury, or are you new to the club?

    :)

  • avatar
    HEATHROI

    Landcrusher

    maybe, who knows, I haven’t had to fly anywhere recently.

  • avatar
    50merc

    “Renault has no choice but to keep production at their plant in Sandouville running … vehicles like the Renault Laguna and the Vel Satis … are going to be more redundant …”

    Non, monsieur! Did you not notice that the plant has already achieved 37 percent productivity and is headed for 31? With that record of Gallic [in]efficiency, it is not at all unreasonable to expect that even more astonishing levels of unproductivity can be attained. There will be no surplus vehicles, just an ever-growing number of labor hours per vehicle produced.

  • avatar
    Martin Schwoerer

    Sarko rides in a C6. And you can’t understand the Vel Satis if you’ve never seen a TGV. In terms of layout and interior design, the Vel Satis is excellent. But it’s let down an inferior ride/handling compromise.

  • avatar
    FromBrazil

    And you can’t understand the Vel Satis if you’ve never seen a TGV. In terms of layout and interior design, the Vel Satis is excellent. But it’s let down an inferior ride/handling compromise

    So true, so true. The reason I’d not get this car is the ride, not the design. It’s an interesting and, in its own way, a beautiful design. Alas…

    Appreciators of the same old same old (Germans, Japanese, Koreans et al) need not apply.

    I think the new Renaults are straddling the line between “the too difficult to understand” and “looks like a normal car” line rather well. Particularly the new Megane (hatch and SW-very beautiful!), Laguna and Clio, though the Scènic has grown worse w/ each passing redesign. Same as the Twingo. The 1st ones were masterpieces. And by the way, the Lincoln C concept car is a beautiful American take on modern French car design.

    Disclosure: don’t care much for the Peugeots and Citroëns though. Too cute and too predictable. So that doesn’t make me a general French car apologist.

    FWIW I rather like that there is a company such as Renault ready to break the mold. Even when they get it wrong. More power too them!


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