Carlos Ghosn's Renault Revamp: Challenges and Objectives

Carlos Ghosn's first two weeks in the top job at Renault have given him a clear view of what needs to be done to boost profits, despite the company's record year in 2004. Ghosn plans to spend two-thirds of his time on Renault and the rest on Nissan, where he has appointed a chief operating officer to handle day-to-day business. His three-year targets for Renault are said to be "hard but very well thought out," although he is unwilling to reveal specifics until later this year. Ghosn's previous success at Nissan has investors guessing that he will take a more radical approach at Renault, but some financial analysts have expressed skepticism about his ability to cut costs at the French carmaker due to its current profitability.

Key Takeaways:

• Ghosn has spent his first two weeks at Renault visiting factories and development centers to gain "physical" knowledge of the company and its workforce.
• He has stated that even though 2004 was a record year for Renault, he is confident that much more can be done to boost profits.
• Ghosn plans to return to Nissan's successful model, introducing luxury models, more 4x4s, better reliability and improved customer service.
• His three-year targets for Renault will be announced later this year, and he expects to spend two-thirds of his time on Renault and the rest on Nissan.
• Ghosn will face significant challenges, including fixing Renault's large car business and deciding whether to return to the US market, which it left in 1987 after several years of losses.
• His success at Nissan has raised expectations about his ability to revamp Renault, but some financial analysts are skeptical about his ability to cut costs at the French carmaker.

Statistics:

• 2004 was a record year for Renault.
• 4% is Renault's estimated operating profit margin for 2005, less than half of Nissan's forecast.
• Renault's profits are expected to be around 4 billion euros in 2005, down from 4.5 billion in 2004.
• 2/3 of Ghosn's time will be spent on Renault, while 1/3 will be spent on Nissan.
• Renault's share price has risen 5% since the announcement of Ghosn's appointment.
• Nissan's expected operating profit margin for 2005 is 9%, compared to 4% for Renault.

Sources:

• Financial Times: "Carlos Ghosn: Renault's new boss maps out plans"
• Garel Rhys, Cardiff University Automotive Research Centre: interview
• Louis Schweitzer, Renault chairman: quoted in the Financial Times
• Reuters: "Renault's Ghosn to spend two-thirds of time on Renault"