European NUMMI-Style Divorce?
A year ago I reported how Renault was using French Government money in exchange for keeping jobs in France. Then Renault landed themselves in trouble when Renault wanted to transfer production of the Clio to Turkey and the French Government made their feelings quite clear. Then they started slagging other low cost countries off. Now it appears Renault are at it again, only this time they may succeed.
Reuters reports that a French Industry Ministry spokesperson says that Renault will produce their new Trafic van in their woefully underutilized Sandouville plant. This “announcement” came after French politicians called for Renault to do more to protect French jobs. And with impending austerity cuts looming and the French citizens not pleased about it, every jobs counts.
Naturally, Renault tried to smother this announcement by getting a spokesperson to declare that it was too early to reveal which model would be built at the Sandouville site. “It’s a vehicle that will come out in 2013 so we won’t announce it straight away. It won’t be in the coming months,” said the Renault spokesperson. Now why would Renault be so quick to try and smother this? Well, two reasons.
1. Brussels is not much pleased with the amount of state aid being thrown around and will be watching Renault with a very close eye. Especially if there are jobs for state aid trades – strictly against EU rules.
2. Moving production of the Trafic isn’t as easy as it sounds.
The Trafic is made in Luton, UK under a joint venture between Nissan (who builds the Primastar there) and Opel/Vauxhall (who builds the Vivaro there). Renault would have to discuss any transfer of production with them before anything can happen.
France’s Le Figaro says that Renault would be trying to convince Opel/Vauxhall Nissan to move production to Sandouville as well. Good luck with that. GM has enough troubles in Europe. Nissan will want to keep jobs in the UK. The low pound is helping them and they don’t want to annoy the UK government at a time when their government loans for the Leaf may be cut.
Could we have a nasty NUMMI-type divorce in Europe? That’s an issue with a consolidated industry. Not only do you share costs, you share problems, too.
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The GMM Luton plant has been living for a few years with the uncertainty of it's future ahead of them. That Renault want out of this JV is no big surprise. Sandouville has some of the lowest utilisation rates of any Renault-Nissan plants thanks to blockbuster vehicles like the Espace and Vel Satis, and the shrinking D/E segments. Also, the current vehicle line-ups coming from Luton began rolling off the line in 2006. By 2013, they'll need a new LCV model to be competitive. Now that Renault/Nissan and Daimler can share CapEx costs, they'll probably be happy to design their next van together and use their own production capacity instead of GM's. Which will also likely mean that VW are going to have start building their own LCV soon as we can expect their sharing arrangement with the Mercedes Sprinter (VW Crafter) to also grind to a halt. So this can't really be compared to NUMMI where GM and Toyota had a 50/50 JV which GM simply walked away from. This particular alliance project was based on shared development costs and a contract manufacturing deal. I think Manga Steyr and other Tier 0.5s deal with this situation quite often. I can't imagine anyone wanting to do another similar deal that would keep GMM Luton in business.
In today's globalized world Renault corporate attitude is surely misguided. Who will want to buy Renault cars outside of France if there is so little respect to foreign source assemblies? I definitely wouldn't!