Régie Nationale Des Usines Renault

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Régie Nationale Des Usines Renault

34 Quai du Point du Jour BP 103
Boulogne-Billancourt 92 109
France
609-1530

State-owned
Incorporated: 1945
Employees: 215,844
Sales: FFr 121.7 billion (US$18.9 billion)

The closest parallel in the French automobile industry to Henry Ford was Louis Renault. His youthful interest in mechanical contrivances, especially steam engines and electrical devices, was accepted by his well-to-do family and he was allowed to have his own workshop on the family’s property.

Soon after he finished his military service and his father had passed away, Louis convinced his older brothers Fernand and Marcel to each invest FFr30,000 to build an automobile firm which would be called Renault Freres. In 1899 Renault Freres received its first down payments for motor cars at FFrl,000 per vehicle. Primarily an assembly operation in the early years, Renault Freres expanded operations as fast as it could acquire components and erect buildings. Engines, tires, radiators, gears, steel, and electrical equipment all came from other companies. Already by 1899, the industry had generated a considerable range of specialist component firms. Marcel Renault soon joined the active management of the company in order to lessen some of Louis’ work load, since he preferred to work in the shop rather than attend to commercial details. By 1901 the company had become the eighth largest firm in the automobile industry, based on the manufacture of a small, inexpensive, and reliable car. Its success should not be measured only by its sales and profits, however, but by its imitators; Louis Renault’s transmission system was eagerly copied by other small car manufacturers.

Perhaps the most important ingredient in the firm’s early success was the publicity Renault’s cars received as a consequence of their racing prowess. Both Marcel and Louis Renault were expert racing drivers and they were victorious in numerous international events. But in 1903, while competing in the Paris-Madrid race, Marcel Renault was killed. Louis immediately withdrew his cars from the racing circuit and his company did not compete again for several years.

After 1905 Renault’s taxicab became his largest selling product. Work began on this line late in that year when the company won an order for 250 chassis. The large orders for cabs soon made Renault the most important French automobile producer.

The firm did considerable export business during this period. In 1912, for example, nearly 100 Renault cabs were in service in Mexico City, and Renaults outnumbered all the other types of taxicabs in Melbourne. By 1914 the company had 31 dealers in foreign countries, from Yalta to Shanghai. Louis Renault himself did not take as much interest in these marketing matters as he did in the technical aspects of his business. He considered himself more of an inventor than anything else, and took out in his own name about 700 patents for devices that he had made personally or that had been developed in his factory.

Like several other automobile firms, Renault participated in the development of aviation in France. In 1907 the company began to experiment with aircraft engines, attempting to extract the most power possible from lightweight, air-cooled motors. While somewhat successful technically, this activity brought no profits at the time. Nevertheless, the discoveries and the experience which resulted found their justification in the war that soon followed. During World War I the company became an important manufacturer of all sorts of military equipment, including aviation engines and the light tanks that proved so effective in 1918.

After the war, the Renault factory expanded. But while the firm remained among the top producers in France during the inter-war period, Louis Renault was slow to adopt new technical and organizational ideas. This reluctance significantly hindered the company’s growth. Then, when Paris was liberated, near the end of World War II, Louis Renault was jailed on a charge of Nazi collaboration. He died in prison before his case could be examined and the de Gaulle provisional government nationalized his company. The government installed some inspired technocrats to operate the company along commercial lines, and they made it into a showpiece of French industry. The firm built up its own production of machine tools and its factory was the first in Europe to use automation. In 1948, the company began to manufacture a miniature car called the Quatre Chevaux (4 CV or hp) which had been planned secretly during the war by Renault technicians.

The Quatre Chevaux proved to be a symbol of the social philosophy which has guided Renault ever since, first under Pierre Lefaucheux and then under his successor Pierre Dreyfus. An idealistic kind of technocrat, Dreyfus regarded the car as a social instrument which every family had a right to possess. Therefore, the firm concentrated on a large production of relatively small and inexpensive cars, the models gradually growing in size as French incomes and living standards rose. The other feature of this social philosophy was the idea that a firm owes its workers not only a wage, but also as full and happy a life as possible. With state support Renault led the field in welfare and labor relations.

It is possible to view the introduction of the Quatre Chevaux either as an example of effective business management or as the use of a state firm to provide a lower cost product. During the 1950’s and 1960’s the company maintained its record for effective product innovation. The Dauphine was manufactured in order to fit into the market opening between the inexpensive economy models and the higher priced models. The new model soon became quite popular and outsold all others for the next five years. A second distinctive aspect of Renault’s success has been its emphasis on exports. It was one of the first companies in the automobile industry to make a serious effort to develop a sales organization in the United States.

Due to the interest in Renault cars within the United States, the company was initially aiming to penetrate the market by supplying 1000 cars per month. However, the United States ordered no fewer than 3000 cars in only one month. Consequently, Renault increased their daily production rate from 300 to approximately 500 units; company production facilities were near capacity for months in advance. Continued expansion into the world automobile markets remained one of the company’s main concerns for years, and plans were therefore made for the construction of plants abroad. Sales agreements using existing local networks were made in Brazil, Argentina, Algeria, and India.

By the end of 1959 Renault was estimated to be the sixth largest automobile manufacturer in the world. At the beginning of 1960, when the American automobile market began to shrink, sales of the Dauphine dropped by 33% in comparison with the previous year. It was a period of stagnation on the U.S. domestic market and, as a result, Renault was faced with the problem of adjusting to the specific requirements of the American motorist.

In France, meanwhile, preparations were underway for new car models which would be known as the R-4 and the R-8. These were vehicles which had a third side window on a four door body. Subsequently, an error was made on a project which was to have been a large six-cylinder vehicle. Once the accounts had been completed it was discovered that the price of the car ought to have been 25% higher than originally planned. The swift and decisive intervention of Renault’s chairman, Pierre Dreyfus, established the parameters of the new car, which was to have four cylinders, a functional styling, and a competitive price. The result was the R-16, which remained in production until the mid 1970’s and had features that are still retained on more recent models. As a parallel development to car production, Renault had also begun to manufacture the Estafette, a commercial vehicle for door-to-door deliveries, which was replaced by another model in the beginning of the 1980’s.

During the 1970’s Renault went through a period of significant expansion. The success of the R-5, a particularly well-designed and highly reliable vehicle, allowed Renault to stay at the top of the European league of manufacturers. At the same time, a widely based program initiated in 1977 enabled the firm to purchase 46.4% of the shares in American Motors in 1980. The U.S. company then began production of the Alliance and the Encore, corresponding to European versions of the Renault.

The relationship began in 1979 when the two corporations signed an agreement. American Motors became the exclusive North American importer and distributor of

Renault cars, while the French corporation would market American Motors products in France and several other countries. This was followed by the direct purchase of approximately $500 million in American Motors securities. American Motors chairman Gerald Meyers resigned in 1982 and was replaced by Paul Tippett, Jr., who then named Renault’s Jose Dedeurwaerder president and chief operating officer. Other Renault personnel took their places in the corporation and on the board of directors as the first modern trans-Atlantic company was established.

By the mid-1980’s, however, Renault’s small deficit had turned into a one billion dollar loss. Georges Besse arrived in 1985 with a mandate to prevent any further losses. Besse, a pragmatic engineer who rescued the state-owned Pechiney Metals Group, was unable to go much beyond symbolic measures in helping the company. The Socialist government in France had backed away from tough industrial decisions that it feared would hurt the party in national elections. In addition, Besse’s timing was unfortunate since powerful French communists had been arguing that Renault should worry more about upgrading French operations and protecting French jobs than spending money abroad on American Motors. The communists claimed that there was an imbalance between investments needed at home and expansion abroad. AMC’s losses in 1986 made those arguments more compelling in the view of many Frenchmen.

In November of 1986 Besse was assassinated by the French terrorist organization, “Direct Action.” This unfortunate event, however, was not the only one that had an adverse effect on Renault. The company was also suffering from a series of poor marketing judgments which had reduced its share of the domestic auto market. Once the largest car manufacturer in Europe, Renault has slipped to sixth place.

In March 1987 Renault announced it would withdraw from the U.S. market by selling its share in American Motors to the Chrysler Corporation. Under this agreement, which American Motors voted to accept, Renault will be paid upwards of $200 million dollars for its AMC shares and bonds over a period of five years.

Renault will also receive royalties from Chrysler’s marketing of AMC’s newly launched Premier. In exchange, Renault will export between two and three billion dollars worth of automatic components to Chrysler.

Renault’s deal with Chrysler has been criticized by some industry observers; while increasing Renault’s political standing, they say, the deal could ultimately do more harm than good. Renault’s U.S. business had provided 6,000 jobs in France. Yet Christian Martin, Renault’s export director for Europe, stands by the company decision, claiming management reached a compromise in order to avoid an imminent financial crisis.

Principal Subsidiaries

Renault Vehicles Industriéis; Renault Industries Equipements Et Techniques (99.9%); Renault Agriculture; Europcar; Société Nouvelle De Roulements (86%); Chausson (35%); Diffusion Industrielle Et Automobile Par Le Crédit-Diac; Société De Financement Pour L’Extension de L’Industrie-Sofexi.