Renault, to make a profit, sets a goal of 150,000 car sales in US
Renault, France's multifaceted auto manufacturer, is shooting for 3 percent of the US market by 1985. It shouldn't be too hard to do, considering its impending 48 percent tieup with American Motors Corporation (AMC) and the long line of new products on the way. Renault will acquire almost half of AMC by 1982 when a jointly developed car is slated to go into production at the US company's car-building facilities in Kenosha, Wis.
Renault needs to sell about 150,000 cars a year in the US to be able to charge competitive prices and still make a profit. Right now the French firm is idling along at 25,000 cars, so there is a lot of room for improvement.
Clearly, with the exception of a sales flurry in the late 1950s and early '60 s, the company has never found much success in the US.
For more than a year, however, Renault has been marketing its R-5 (Le Car) through an expanding group of AMC dealers and has just introduced both the sedan and wagon of the larger R-18 compact. In two years, a new car will be built in the US, about a year after it goes on sale in France.
The as-yet-unnamed car should be good news, not only for Renault but for struggling AMC as well. It will give the US company a high-mileage vehicle which has eluded AMC for a long time.
AMC and Renault will offer several 4-cylinder gasoline engines in the new subcompact, ranging from 1.4 to 2 liters. It also will have 4- and 5-speed manual transmissions and an automatic.
"We do not plan to build the engines in the US," says Bernard Hanon, head of the Renault car operation and No. 2 man in the company, although Renault hopes to start production with about 50 percent US content, climbing to 75 percent within a few years.
"The engines could come from Europe or even Mexico," he goes on.
Renault plans to build a new engine plant in Mexico as part of an agreement with the Mexican government and is evaluating the size of the plant, its location, and the date when the plant will go into operation.
"It will be within the next three years," asserts Mr. Hanon.
Renault now builds the R-5, R-12, and R-18 in Mexico in a plant some 75 miles from Mexico City. "We sell them in Mexico and a few go to Central America," reports the Renault car chief. Current output is about 115 cars a day.
The new US-built car should also have a diesel engine which would be about the same size as the diesel plant now available in the R- 18 in Europe.
"It's a distinct possibility," he affirms.
Renault and AMC soon will be running tests of the new car with US pollution-control equipment. "Then we'll have a better idea about what we can expect of a diesel running under US condition," he declares.
The French government, which seized control of the company at the end of World War II, owns 92 percent of Renault stock with the remaining 8 percent in the hands of Renault employees. The worker-owned stock, however, is not traded on the open market.
The Renault automotive chief denies that the company is trying to take over AMC. Nonetheless, the inflow of fresh cash will help AMC develop and finance its network of newcar dealers, improve facilities, train personnel, and get the company on the move again.
AMC has been cash-starved for a long time and, with the downturn in auto sales this year, is having its familiar bout with red ink. The linkup with Renault has provided money, front-wheel-drive know-how, and a bevy of new engines.
While the additional $200 million investment in AMC, in addition to the original $150 million, may not seem like a lot of money in these days of multibillion-dollar investments by the large carmakers, the impact on AMC will be far bigger than the figures indicate. For example, Renault will continue to spend a lot of money both in France as well as the rest of Europe to develop new products.
"AMC will benefit from our investment in Europe in technology and components, " asserts Mr. Hanon.
One of the main strengths of Renault is its engines and this will help the US company significantly.
Who initiated the new linkup between the two companies?
"I think it was a joint evaluation of the problems of both companies," responds Mr. Hanon. "We looked at the problems and made an evaluation together."
Renault has long sought a deeper penetration in the US market and it has not been able to achieve its goal for the past 20 years. Among other things, it lacked a viable dealership-service outlet for its cars.
On the other hand, AMC needs money desperately but has the dealership network , plus the component suppliers, which will benefit Renault. Thus, both companies turn up as winners in the linkup.
Renault, with 14,000 dealers in Western Europe, is the largest industrial group in France. It employs 250,000 people and had 1979 sales of almost $15 billion. Early this year it overtook PSA Peugeot-Citroen in the number of vehicles it built.
With such a large stake in the company, will Renault end up with a top-officer slot at AMC?
Probably not; at least in the immediate future. "We haven't considered a Renault president for AMC," replies Mr. Hanon, when asked if that were in his thought.
"We're going to take a different approach.I think what we'll see is a stepped-up exchange of personnel as we do in the other operations in which we are involved." In other words, there'll be more Americans working in Paris and more Frenchmen at the AMC plant in Kenosha. Renault has had a team of 45 or 50 working in the US for the past two years under the leadership of Phillippe Ventre.
"The Renault Detroit group is tremendously helpful," says J. Paul Tippett, AMC president, "because they know whom to call back at the plant," adding: "For us to try and do this without them would be almost impossible."
Meanwhile, as part of its deal with AMC, Renault expects to introduce the 4 -wheel- drive Jeep in France in 1981. It already is being sold in some countries now.
"Now that we are moving as a major shareholder of AMC, we are looking at all the products," observes Mr. Hanon. "We have to improve every product," he concludes:
"I am convinced that it is good for AMC to have Renault as a partner."
It works both ways, chairman Gerald D. Meyers of AMC might reply.