Can Ghosn repeat trick?
By Kim Tae-jong
Can Carlos Ghosn, chairman of Renault Nissan Alliance, revive the fortunes of the group’s ailing Korean unit, Renault Samsung Motor (RSM)? This is the question the industry has raised ahead of his visit to Seoul today.
The trip is also drawing attention as a very exceptional occasion given the fact that it is his first since February 2008 and comes only a month after two executives of the French automaker came to Korea to inspect the local affiliate and introduce a plan to reinvigorate it.
“We believe that Ghosn will come here with new plans to revive RSM,” an official at the company said. “His plans are expected to be different from those of the executives who recently visited.”
Carlos Tavares, chief operating officer of Renault Group, along with Jerome Stoll, the group‘s executive vice president, came to Seoul last Month.
Tavares pledged to develop RSM as an export base in Asia and introduce a small crossover utility vehicle to be released late next year as well as an electric vehicle as part of plans to support the troubled local affiliate.
But Ghosn is now required to offer more radical remedy, as Tavares’ plans failed to convince the market and customers.
According to RSM, the chairman will visit the automaker’s manufacturing plant in Busan and the design research center in Giheung, Gyeonggi Province upon his arrival before holding a news conference in the evening in Seoul.
Because he is widely known by his nickname “Mr. Fix It” due to his success reviving troubled Nissan in the 1990s, the auto industry expects him to introduce more detailed and practical measures to help boost RSM’s sluggish sales.
According to the company, it sold a total of 246,959 cars last year, down 9 percent from 2010. It sold 109,221 vehicles locally and 137,738 overseas.
In the first quarter of this year, it saw the biggest drop in year-on-year sales among the five major players in the local market _ the other four being Hyundai, Kia, GM Korea and Ssangyong. Due to the drop, RSM has suspended operations at its Busan plant several times this year.
In June, it only sold 4,008 cars locally, dropping it to fifth in terms of sales volume for the first time and being over taken by Ssanyong, which sold 4,033.
Market experts argue RSM requires immediate and emergency medicine for revival.
“Overall, the auto industry has seen falls in sales in the local market by about 5 percent in the first half of the year, compared to the same period last year,” said Yoon Tae-sik of KDB Daewoo Securities. “Even Hyundai and Kia posted about 4 to 5 percent drops in local sales, but RSM’s situation is a way too worse, as their sales dropped 30 percent.”
He suggested RSM needs to add more vehicles to its lineup and introduce designs from Nissan not from Renault, which Korean drivers prefer.
Currently, RSM sells three sedans ― the SM3, the SM5 and the SM7 ― and the QM5 SUV, a relatively limited lineup compared to local competitors.
Ghosn has repeatedly refuted rumors that the French automaker may sell off its Korean unit amid global economic uncertainty, pledging full support for operations here, and the group also reaffirmed it when the two top executives came to Seoul last month.
“Renault Samsung Motor is facing challenges,” he said during a news conference at the 2012 Beijing International Automotive Exhibition last April. He continued that it was not right to seek a getaway plan whenever meeting a “bump.”
But it is true that the group has delayed introducing more detailed and effective plans, and consequently failed to wipe out such rumors completely.
Industry insiders think Ghosn will introduce a radical plan as has done so before. Ghosn slashed more than 20,000 jobs and closed assembly plants when he revived Nissan, receiving plenty of criticism.
He is also expected to say the group will use RSM as an export base, but this time he will have more details.
According to the Nikkei business daily Thursday, Nissan Motor will outsource production of some vehicles to RSM to meet strong demand and ease the impact of a strong yen.
The Japanese automaker, which has struggled with insufficient production capacity, is considering using the Korean plant to tackle this, and take advantage of the country’s free trade agreements with the European Union and other countries, the paper said.
“It will be in line with the move by Nissan to decrease local production and expand overseas sales,” an industry source with the knowledge of the issue said. “Nissan may shut down some of facilities in Kyushu for this.”
This is a highly possible scenario given the fact that Ghosn showed interest in taking over Ssanyong in 2010. It was said that he wanted to use the Korean SUV maker because it could be a better choice than expanding RSM’s facilities.
But he dropped out of the race as its price tag was 350 billion won, much higher than expected.
Given such anticipation, Ghosn is expected to elaborate more on the use of RSM to expand exports of cars from the Renault Nissan alliance to other countries.
The combined market share of Renault Nissan stood at 10 percent, making the alliance the third biggest automaker in the world, and their sales volumes have been increasing.
The Renault Group reported record sales volumes for 2011, with 2.7 million vehicles sold, 3.6 percent up from 2010, and its global market share stands at 3.6 percent. Nissan's global sales reached a record-high of 4.845 million and its share of the global market rose to 6.4 percent.
Currently, RSM builds some Nissan-flagged cars such as the Sunny and Almera bound for markets such as Russia and the Middle East, and Renault-branded vehicles for China, Europe and other markets.
With an annual capacity of 300,000 vehicles, the plant has cut production in recent months in the face of slumping sales at home and abroad.