Will Renault Group Bring Out Han Cheolsu...? The Reason Behind the Strong Measure of 'Productivity Warning'

Renault Group Vice Chairman: "Productivity at Korean Factory Lower Than Spain"
Management Crisis Deepens, Warns of Stronger Restructuring... May Consider Withdrawal in Worst Case Scenario

Jose Vicente de los Mozos, Vice Chairman of Renault Group

[Asia Economy Reporter Changhwan Lee] Renault Group’s order for Renault Samsung Motors employees to improve productivity is interpreted as a warning that the current management crisis is severe enough that, in the worst case, the company might consider withdrawing from Korea.

On the 9th, Jose Vicente de Los Mozos, Executive Vice President of Renault Group, delivered a video message to employees at the Renault Samsung Busan plant, urging urgent productivity improvements due to the serious management crisis Renault Samsung is currently facing.

Renault Samsung is estimated to have incurred losses amounting to several hundred billion won last year due to worsening management and labor relations. Although Renault Samsung launched six new models in the domestic market last year, it only sold 95,939 units, failing internally to meet the target of 100,000 units. Due to the deteriorating management situation, a ‘survival plan’ has been activated, and voluntary retirement is also underway. Amid these circumstances, the Renault Samsung labor union recently decided to strike, putting pressure on management.

As Renault Samsung’s management improvement efforts have been hampered by labor relations, it is interpreted that the headquarters has ordered stronger restructuring measures.

In particular, Renault Group is concerned that wages and taxes at the Busan plant are too high compared to plants in other countries, leading to declining productivity. Internally, Renault Group’s production competitiveness (QCTP) of the Renault Samsung Busan plant dropped from 5th place in 2019 to 10th place in 2020, and the plant’s manufacturing cost score ranked only 17th in 2020, showing the lowest scores in cost-related categories.

It is analyzed that the overall production competitiveness declined significantly as the production of Nissan Rogue at the Busan plant ended in March 2020, and production schedules were greatly reduced after inventory adjustments since September last year.

Renault Group is reportedly demanding stronger executive cuts and wage reductions from Renault Samsung. Currently, Renault Group is conducting restructuring in various countries worldwide, and in Latin America’s Brazil?mentioned alongside Korea as a region for profitability improvement?about 1,300 employees have already been laid off, and new employee wages have been cut by 20%.

In the worst case, there is a prospect that Renault Group might consider withdrawing from Korea, similar to GM. When Renault Samsung went on strike early last year over wage issues, Vice President de Los Mozos visited the Busan plant and expressed concerns about production cost allocation failures and loss of competitiveness, stating, "The production costs at the Busan plant are already the highest among Renault Group plants." This was a pre-warning indicating possible future alternative actions.

An industry insider said, "From Renault’s perspective, if losses continue in the Korean market and labor disputes worsen, they might choose extreme measures such as withdrawal," adding, "It is possible that several stages of scenarios have already been prepared."

This content was produced with the assistance of AI translation services.