Renault Group aims to slash fixed costs by over 2 billion euros over three years

by Autocar Pro News Desk , 29 May 2020

Groupe Renault today presented its transformation plan, which aims to achieve savings of more than 2 billion euros (Rs 16,534 crore) over three years and to lay the foundations for a new competitiveness. Driving this transformation are the difficulties encountered by the Group, the major crisis facing the automotive industry and the urgency of the ecological transition.

Renault says the draft plan will strengthen the company's resilience by focusing on cash flow generation, while keeping the customer at the centre of its priorities. It is based on a more efficient approach to operational activities and rigorous management of resources.

Beyond this, the draft plan aims to lay the foundations for Groupe Renault’s long-term development. In France, the Group would be organizsed around strategic business areas with a promising future: electric vehicles, LCVs, the circular economy and high value-added innovation. These major regional centres of excellence based in France would be at the heart of the Group's recovery. The Group plans to reorganise its activities in Flins and Guyancourt.

To ensure a return to profitable and sustainable growth would mean "necessary workforce adjustments".  It would be spread over three years and would concern nearly 4,600 posts in France, to which would be added the reduction of more than 10,000 other positions in the rest of the world.

"I have confidence in our assets, our values and in the management of the company to succeed with the envisaged transformation and to return our Group to its full value by deploying this plan. The planned changes are fundamental to ensure the sustainability of the company and its development over the long term. It is collectively and with the support of our Alliance partners that we will be able to achieve our objectives and make Groupe Renault a major player in the automotive industry in the years ahead. We are fully aware of our responsibility and the planned transformation can only be achieved with respect for all our Group's stakeholders and through exemplary social dialogue, said Jean-Dominique Senard, Chairman of the Board of Directors of Renault.

Key highlights of the draft plan
Improving efficiency and reducing engineering costs, leveraging Alliance assets (savings of 800 million euros):
- Streamlining vehicle design and development: reducing component diversity, increasing standardisation, Leader - Follower programs within the Alliance.
- Optimisation of resources: concentration of the development of strategic technologies with high added value in the engineering sites of Ile-de-France; optimization of the use of R&D centres abroad and subcontracting; optimization of the means of validation through the increased use of digital.

Optimisation of production (savings 650 million euros)
- Acceleration of plant transformation through the generalization of Industry 4.0
- Process improvement in new engineering projects: accelerating digitalisation and 'design to process'.
- Right sizing of industrial capacities:
- Global production capacity revised from 4 million vehicles in 2019 to 3.3 million by 2024.

Adjustment of production headcount
- Suspension of planned capacity increase projects in Morocco and Romania, study of the adaptation of the Group's production capacities in Russia, study of the rationalisation of gearbox manufacturing worldwide.
- In France, four working hypotheses for optimising the production will be the subject of in-depth consultation with all stakeholders, in particular the social partners and local authorities:
- Renault is launching a consultation process on the Douai and Maubeuge plants to study the creation of an optimized centre of excellence for electric vehicles and light commercial vehicles in northern France.

Increased efficiency of support functions  (saving 700 million euros)
Optimization of general and marketing costs: digitalization to optimize marketing costs, rationalization of the organization and reduction of costs related to support functions.

Refocusing activities for a better allocation of resources
This refocusing on the Group's core business through a change in its scope would concern in particular:
- Part of the RRG integrated distribution network in Europe.
- The transfer of Groupe Renault's stake in Dongfeng Renault Automotive Company Ltd (DRAC) in China to Dongfeng Motor Corporation and the cessation of Renault branded passenger car combustion engine activities in the Chinese market.

The Renault Group says the estimated cost of implementing this plan is in the order of 1.2 billion euros (Rs 16,534 crore)

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