Renault's location strategy
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  1. #1
    1000+ Posts gerry freed's Avatar
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    Default Renault's location strategy

    The negotiations continue about security of employment in Renault's French factories. Ghosn has taken the position that either the Unions allow flexibility to hire and fire, relocate and adjust working hours to meet the market situation or he will start shutting French factories. He proposes to regroup French assembly facilities in two complexes, one in the West and one in the North East. The government, who are a shareholder, want their voice in the negotiations but so far the other parties aren't too enthusiastic. Renault has the great advantage over PSA that it has cash and can't be bullied. If you wan't more background see the current Economist journal from the UK, which has the French situation as its front cover story.
    Meanwhile the Prime Minister has been in Berlin today trying to reassure Merkel of their economic management. The reports are that her advisers are not impressed and that she continues to press for a steep reduction in public expenditure. The German press and the Economist are making the point that it is not Spain or Greece that could pull down the Euro, but France.

    While these very serious plays are in progress, both groups are selling better cars than ever but just not enough volume in Europe to make money.

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    Last edited by gerry freed; 16th November 2012 at 05:03 PM.
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    1000+ Posts schlitzaugen's Avatar
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    So where are the Renault money making sales? I thought the Dacia range was making money in Europe?
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  3. #3
    1000+ Posts gerry freed's Avatar
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    Dacias are profitable and highly competitive. Cars built in France are more costly than in other Renault Nissan factories elsewhere. There are suggestions from management demands that quality is higher elsewhere too. The French , not just car assembly workers, are not competitive because of the costs of a 35 hour week, 6 weeks holiday, 60 retirement etc etc. The Clio is the benchmark. It is being made in North Africa and France and the company sees no good reason to continue in France when it loses money on those cars that are built there.
    The Dacia started in Rumania and is now made in Russia and in other emerging markets, not in France.
    This is just a part of the unravelling of a history of pork barreling that was debt financed and canot be continued. France is fighting for economic survival and Renault is just a hot spot in the overall pain of restructuring society.
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    Quote Originally Posted by gerry freed View Post
    . If you wan't more background see the current Economist journal from the UK, which has the French situation as its front cover story.
    .
    the article referred to:

    The time-bomb at the heart of Europe

    Why France could become the biggest danger to Europe’s single currency

    THE threat of the euro’s collapse has abated for the moment, but putting the single currency right will involve years of pain. The pressure for reform and budget cuts is fiercest in Greece, Portugal, Spain and Italy, which all saw mass strikes and clashes with police this week . But ahead looms a bigger problem that could dwarf any of these: France.

    The country has always been at the heart of the euro, as of the European Union. President François Mitterrand argued for the single currency because he hoped to bolster French influence in an EU that would otherwise fall under the sway of a unified Germany. France has gained from the euro: it is borrowing at record low rates and has avoided the troubles of the Mediterranean. Yet even before May, when François Hollande became the country’s first Socialist president since Mitterrand, France had ceded leadership in the euro crisis to Germany. And now its economy looks increasingly vulnerable as well.

    As our special report in this issue explains, France still has many strengths, but its weaknesses have been laid bare by the euro crisis. For years it has been losing competitiveness to Germany and the trend has accelerated as the Germans have cut costs and pushed through big reforms. Without the option of currency devaluation, France has resorted to public spending and debt. Even as other EU countries have curbed the reach of the state, it has grown in France to consume almost 57% of GDP, the highest share in the euro zone. Because of the failure to balance a single budget since 1981, public debt has risen from 22% of GDP then to over 90% now.

    The business climate in France has also worsened. French firms are burdened by overly rigid labour- and product-market regulation, exceptionally high taxes and the euro zone’s heaviest social charges on payrolls. Not surprisingly, new companies are rare. France has fewer small and medium-sized enterprises, today’s engines of job growth, than Germany, Italy or Britain. The economy is stagnant, may tip into recession this quarter and will barely grow next year. Over 10% of the workforce, and over 25% of the young, are jobless. The external current-account deficit has swung from a small surplus in 1999 into one of the euro zone’s biggest deficits. In short, too many of France’s firms are uncompetitive and the country’s bloated government is living beyond its means.

    Hollande at bay

    With enough boldness and grit, Mr Hollande could now reform France. His party holds power in the legislature and in almost all the regions. The left should be better able than the right to persuade the unions to accept change. Mr Hollande has acknowledged that France lacks competitiveness. And, encouragingly, he has recently promised to implement many of the changes recommended in a new report by Louis Gallois, a businessman, including reducing the burden of social charges on companies. The president wants to make the labour market more flexible. This week he even talked of the excessive size of the state, promising to “do better, while spending less”.

    Yet set against the gravity of France’s economic problems, Mr Hollande still seems half-hearted. Why should business believe him when he has already pushed through a string of leftish measures, including a 75% top income-tax rate, increased taxes on companies, wealth, capital gains and dividends, a higher minimum wage and a partial rollback of a previously accepted rise in the pension age? No wonder so many would-be entrepreneurs are talking of leaving the country.

    Explore our interactive guide to Europe's troubled economies.European governments that have undertaken big reforms have done so because there was a deep sense of crisis, because voters believed there was no alternative and because political leaders had the conviction that change was unavoidable. None of this describes Mr Hollande or France. During the election campaign, Mr Hollande barely mentioned the need for business-friendly reform, focusing instead on ending austerity. His Socialist Party remains unmodernised and hostile to capitalism: since he began to warn about France’s competitiveness, his approval rating has plunged. Worse, France is aiming at a moving target. All euro-zone countries are making structural reforms, and mostly faster and more extensively than France is doing . The IMF recently warned that France risks being left behind by Italy and Spain.

    At stake is not just the future of France, but that of the euro. Mr Hollande has correctly badgered Angela Merkel for pushing austerity too hard. But he has hidden behind his napkin when it comes to the political integration needed to solve the euro crisis. There has to be greater European-level control over national economic policies. France has reluctantly ratified the recent fiscal compact, which gives Brussels extra budgetary powers. But neither the elite nor the voters are yet prepared to transfer more sovereignty, just as they are unprepared for deep structural reforms. While most countries discuss how much sovereignty they will have to give up, France is resolutely avoiding any debate on the future of Europe. Mr Hollande was badly burned in 2005 when voters rejected the EU constitutional treaty after his party split down the middle. A repeat of that would pitch the single currency into chaos.

    Too big not to succeed?

    Our most recent special report on a big European country (in June 2011) focused on Italy’s failure to reform under Silvio Berlusconi; by the end of the year he was out—and change had begun. So far investors have been indulgent of France; indeed, long-term interest rates have fallen a bit. But sooner or later the centime will drop. You cannot defy economics for long.
    Unless Mr Hollande shows that he is genuinely committed to changing the path his country has been on for the past 30 years, France will lose the faith of investors—and of Germany. As several euro-zone countries have found, sentiment in the markets can shift quickly. The crisis could hit as early as next year. Previous European currency upheavals have often started elsewhere only to finish by engulfing France—and this time, too, France rather than Italy or Spain could be where the euro’s fate is decided. Mr Hollande does not have long to defuse the time-bomb at the heart of Europe.

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