Renault will cut 14,600 jobs as the coronavirus crisis impacts auto industry. The move is a part of a major overhaul to reduce business costs.
The French carmaker will slash jobs in order to survive the coronavirus pandemic. Some 4,600 positions will be removed in France and 10,000 more in other markets.
On Friday, Renault announced that it will slash fixed costs by more than €2 billion or $2.2 billion over the next three years.
The company will also reduce its capacity, reducing the number of units it manufacturers each year from 4 million to 3.3 million by 2024.
It will also stop offering Renault-branded vehicles in China. According to the company, this plan will cost about €1.2 billion $1.3 billion to implement.
Fewer cars
Renault (RNLSY) is a member of the world's biggest carmaking alliance. Other members are Nissan (NSANF) and Mitsubishi (MBFJF).
All these car companies announced they would produce fewer cars, share production facilities, and concentrate on the existing geographic and technological strengths of each brand as they try to minimize costs amid the coronavirus pandemic.
According to Renault, the changes are important because of the lack of activities in the global automotive market. The economic damage brought by the coronavirus pandemic as well as stricter emissions standards also contributed to their current situation.
However, the company was in trouble before the coronavirus crisis hits. It recorded net profit that declined by 99% to just €19 million or $21 million.
"The Covid crisis has only aggravated an existing situation," acting CEO Clotilde Delbos said on a call with analysts on Friday. "This adverse economic environment has shown the limits of our business model, which was betting on unprecedented market growth in emerging markets and therefore on record sales," she added.
Meanwhile, shares in Renault fell by 50% for the year. The company is negotiating wsith the government of France, which owns a 15% stake, over the terms of a €5 billion or $5.4 billion loan.
Corporate sustainability
During the leadership of Renault former CEO Carlos Ghosn, the company entered an aggressive expansion strategy. The objective was to drive sales volumes through what Delbos saw as a "diverse, complex and costly lineup."
"We pay the price of this model today," Delbos said. "Our ever increasing size and structural costs are set for growth that did not take place."
With this, Renault will trim down its costs in the engineering, production, and sales and administration areas. The company, which has 180,000 personnel worldwide, plans to consult with unions about restructuring some of its plants in France.
"The planned changes are fundamental to ensure the sustainability of the company and its development over the long term," chairman Jean-Dominique Senard said in a statement.
Car companies have been facing a decline globally, with sales dropping in each of the past two years following a record 2017. The coronavirus pandemic has worsened the slump.
French President Emmanuel Macron announced an $8.8 billion stimulus for the auto industry. Luca de Meo, who previously served as president of Volkswagen (VLKAF) brand SEAT, will serve as the new chief executive at Renault on July 1.
Meanwhile, Nissan said it will reduce production capacity by 20% and shutting down a plant in Spain as part of the overhaul.
