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Renault-Nissan renews commitment to Korea

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Published : 2012-07-22 20:13
Updated : 2012-07-22 20:13

Investment plan lacks specific measures to boost Renault Samsung’s sagging sales


In his surprise visit to Korea last week, Carlos Ghosn, chairman and CEO of the Renault-Nissan Alliance, expressed his commitment to reviving the ailing Korean unit Renault Samsung Motors.

Ghosn, who is also chairman of Nissan Motor, unveiled a 170 billion won ($160 million) investment plan in the production of Nissan vehicles at Renault Samsung Motors’ Busan plant during a news conference held in Seoul on Friday.

“We were just napping,” he said of Renault Samsung’s recent sluggish performance in car sales. “But now a wakeup call is ringing loudly that raises a need for us to improve competitiveness significantly.”

Under his rescue plan, RSM will produce 80,000 next-generation Nissan Rogue crossover sport-utility vehicles at its factory in the southern port city of Busan starting in 2014.

The Rogue vehicles produced in Busan will be shipped mostly to North America, taking advantage of the Korea-U.S. Free Trade Agreement and a more favorable exchange rate here than in Japan.

Previously, Nissan had been considering expanding the capacity of its Smyrna, Tennessee, assembly plant for the Rogue model, which is Nissan’s strategy to directly target the North American market.

“Korea is a very competitive base,” Ghosn said. 
Carlos Ghosn, chairman and CEO of the Renault-Nissan Alliance, speaks during a press conference in Seoul on
Friday. (Renault Samsung Motors)

“The Korean government has done a great job in supporting this industry with very competitive foreign exchange rates, which has allowed the industry to weather the storm very well and continue to expand.”

Company officials said the Busan production of Nissan cars is expected to give new momentum to Renault Samsung, which is struggling with plunging sales in Korea and abroad.

In the first six months of the year, the carmaker sold 83,062 vehicles, down 33 percent from a year earlier.

Despite its production capacity of 300,000 vehicles a year, the plant produced only 240,000 cars last year. This year it aims to build just 150,000 vehicles.

“The plan aims to achieve efficiency and cost competitiveness in Busan, while expanding RSM’s vehicle lineup, which today consists of four models,” he said.

“Adding production in Korea shows a commitment across the alliance to helping Renault Samsung achieve its targets for cost competitiveness and growth.”

Friday’s announcement by Ghosn, one of the auto industry’s most powerful leaders, however, fell short of meeting the expectations of industry watchers here.

“The new investment plan doesn’t include more specific measures for Renault Samsung to strengthen competitiveness in the domestic market,” an industry source said, declining to be identified.

“Even though Ghosn stressed Korea was emerging as an export base for the Renault-Nissan Alliance, he said Renault has no plan to further increase the capacity of the Busan plant.”

During the news conference, Ghosn said the new investment plan would focus on one particular product ― the Rogue ― adding that “the 300,000 (unit) capacity that we have in Busan should be filled little by little.”

“Without introducing new models, the carmaker is likely to remain one of the regional production bases for Renault while its role in research and development is largely limited,” the industry source said.

On Friday, Renault Samsung Motors CEO Francois Provost flatly denied market speculation that RSM engineers were leaving the company, saying there has been no increase in staff turnover.

Ghosn, 58, joined near-bankrupt Nissan in 1999 and became CEO in 2001. He has played a leading role turning Nissan into Japan’s second-largest carmaker in terms of sales.

Asked to comment on RSM’s local rivals, Ghosn declined, saying he has never commented on competitors in the past 12 years.

By Lee Ji-yoon (jylee@heraldcorp.com)

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