In what Renault CEO Carlos Ghosn described as a “historic” event, the automaker has come to an agreement with the three unions representing its French workers that will keep five Renault factories in France running until at least 2016 while using attrition and retirements to reduce their workforce by 7,500 employees.
To keep all of the company’s French assembly plants open, the unions, Force Ouvriere, CFE-CGC and CFDT, appear to have agreed to what amounts to a wage cut, at least to begin with. There is a salary freeze for the first year of the agreement, but workers will have to put in 6.5% more hours in their workweek and increase production by a third. It’s interesting that Ghosn got the French unions to agree to a longer workweek not long after the recent dust up between Titan tire CEO Maurice Taylor and French finance minister Arnaud Montebourg over how lazy or productive French workers are or aren’t.
Ghosn said that the contract is a “balanced agreement” and will allow Renault to “renew its competitiveness in France”. The agreement follows a pattern set earlier between Renault and Spanish unions, pressuring its French workers. Ghosn is using a different strategy to cope with the problem overcapacity in a stagnant European car market than other automakers. Ford, PSA and Opel have all announced planned factory closings. The Wall Street Journal reports that there are as many as 20 auto assembly facilities in western Europe that are running at less than 50% capacity. Ghosn’s plan is apparently to boost productivity and lower the company’s break-even point with its French operations. The company says that the increase in working hours will lower costs by an average of €300 ($390) a car. I guess Renault is dealing with the overcapacity situation by actually using more of that capacity. Before the global financial crisis, Renault assembled 1.2 million cars in France in 2007. That figure dropped to 532,000 for 2012. The company says that planned production of 710,000 cars in France by 2016 will improve utilization to 85% of capacity.
Some of that increased production will involve building 80,000 Nissans a year for Renault’s strategic partner. Though Ghosn predicted that a “promising” line of new cars will change Renault’s fortunes on the continent, since he only recently said that the European market won’t experience any growth for years, I think that making cars for Nissan and Renaults for export is going to be what that increased production is for. Renault’s international sales have indeed been up and despite the doldrums in Europe, Renault did make $2.3 billion in profits for 2012. At home, though, things aren’t good. Overall car sales in France in 2012 were down 14% and in the European market in general, Renault has not been competitive. Last year Renault lost more than a percentage point of market share in Europe as its sales fell 19% in that region.
Ghosn may not have a choice about lowering per-car assembly costs. His competitors have been waging a price war as they lower prices in their own way of keeping assembly lines running and capacity utilization high.
Ronnie Schreiber edits Cars In Depth, a realistic perspective on cars & car culture and the original 3D car site. If you found this post worthwhile, you can dig deeper at Cars In Depth. If the 3D thing freaks you out, don’t worry, all the photo and video players in use at the site have mono options. Thanks for reading – RJS