Renault urges Korean unit to improve productivity

Renault Group Executive Vice President Jose Vicente de Los Mozos, center, attends a briefing session by an unnamed Renault Samsung executive on the sidelines of a guided tour of the Korean affiliate company's manufacturing plant in Busan, the country's second-largest city, January 2019. Courtesy of Renault Samsung

By Kim Yoo-chul

As negotiations between the Renault Samsung Motors union and management over wage-related issues stalled, a senior Renault Group executive asked its Korean affiliate to explore ways to improve productivity.

Such a warning, which are interpreted by many as rare, came as Renault Samsung is currently being operated under its “survival plan” protocol with the central focus on cutting fixed costs and improving profits amid the COVID-19 pandemic. The Renault Samsung workers' union approved a plan recently to go on strike.

Last year, Renault Samsung Motors vowed to improve productivity at its key plant in Busan, the country's second-largest city, as a condition to wining some production of the XM3 SUV headed for European markets. Renault Group allowed the plant to produce large number of the XM3 for overseas sales in September.

“But Renault Samsung didn't stick to this as of the end of 2020 because the manufacturing costs per XM3 at the Busan plant are twice that of the Captur SUV's cost-per-unit at (Renault's) Spain plant,” Jose Vicente de Los Mozos, Renault Group's executive vice president who is also in charge of the group's supply chain, said in a video message delivered to workers at the Busan plant. The plant is the only manufacturing facility operated by Renault in Korea.

“This clearly shows the Busan plant lags far behind (Renault's other plants). The problems should be tackled immediately,” the message read. Due to longer distances, vehicles manufactured at the plant have high logistics costs, resulting in consumers having to pay more, he said.

The executive added he will come up with new plans if promises aren't met, though he declined to elaborate. Renault's Korean affiliate earlier said it plans to cut the number of executives by 30 percent to 40 percent and their pay by 20 percent. Additionally, it also initiated a voluntary retirement program as part of restructuring, a step the union opposes.

But when it comes to Renault Samsung's fact sheets, it's not in good shape as the Korean unit reported an operating loss for the first time in eight years last year as sales fell 35 percent to 116,166 vehicles from 177,450 a year earlier. Exports plunged 78 percent to 20,227 from 90,591.

Hit hard by the COVID-19 pandemic, foreign and domestic carmakers operating here are suffering from declining vehicle sales. SsangYong Motor is in the process of finding a new owner to avoid court receivership and General Motors Korea appears to have a bumpy road ahead.