By Park Si-soo
Renault-Nissan Alliance unveiled a set of rescue plans on Friday for its struggling South Korean unit Renault Samsung Motors (RSM), but it fell short of satisfying market participants who call it a “stopgap measure” that won’t bring about a dramatic turnaround in the foreseeable future.
At a press conference held in Seoul, Friday, Carlos Ghosn, chief executive of the French auto group, said that his company will inject a total of $160 million into RSM to roll out Nissan’s next-generation crossover Rogue SUVs at RSM’s assembly line in Busan, the country’s southern port city, beginning in 2014.
Ghosn said 80,000 vehicles will be produced there and they will be exported to the United States.
The investment plan reflects the alliance’s sense of urgency to reinvigorate the factory that has suspended operations several times this year amid collapsing domestic sales of RSM products.
RSM’s domestic sales plunged 57.5 percent year-on-year to 4,008 cars in June, with exports falling 42.5 percent to 8,504 vehicles.
Despite the rescue plan, market analysts remain lukewarm, saying the capital injection will give RSM a breather but it is not a fundamental solution and the firm will fall back into trouble if it fails to recover the domestic market share with new models.
“Simply put, this is a stopgap measure that is hard to make visible improvement in the foreseeable future,” said Cho Soo-hong, an analyst at Hyundai Securities. “The biggest problem for RSM is its sluggish sales in the domestic market and ensuing declining market share. But the plan didn’t provide a fundamental solution for this.”
Cho said the Busan factory may operate at full steam thanks to the plan, but it doesn’t necessarily mean that it will bring the company back on track.
Mindful of RSM’s plunging market share and dismal outlook, the CEO, along with the alliance’s senior executives, inspected the Busan factory and an affiliated design research center in Giheung, Gyeonggi Province, prior to the press conference.
“We were just taking a nap,” Ghosn said, admitting his belated awareness of poor performances. “But now a wakeup call is ringing loudly that raises a need for us to improve competitiveness significantly.”
In a statement released prior to the conference, Ghosn said, “Adding production in Korea shows commitment across the alliance to helping Renault Samsung Motors achieve its targets for cost competitiveness and growth.”
He added the investment will also enable RSM to increase cost competitiveness and produce new vehicles for domestic and overseas markets.
“Adding production in Korea shows a commitment across the alliance to helping Renault Samsung Motors achieve its targets for cost competitiveness and growth,” Ghosn was quoted by the company as saying. “The announcement represents a unique win-win-win for Renault, Nissan and RSM, demonstrating the flexibility and power of the alliance for all partners — and I am counting on every RSM employee to contribute to the successful completion of this project.”
RSM officials place high expectation on the measures, saying they will help the firm recover efficiency and cost competitiveness against its four rivals in the domestic market — Hyundai, Kia, GM Korea and Ssangyong.
“The revival plan will enable the (Busan) factory to keep running without trouble,” an RSM official said. “We believe that the plan will help increase our market share and sharpen competitive edge as a whole.”
RSM sold 12,512 vehicles last month, compared with 24,212 a year earlier. Domestic sales plunged 57.5 percent year-on-year to 4,008 vehicles in June, with exports falling 42.5 percent to 8,504 vehicles, the company said.