Renault 1985-2000: From Bankruptcy to Profit

Renault 1985-2000:
From Bankruptcy to Profit

Tom Donnelly, Tim Donnelly & David Morris

Université de Coventry

1. Introduction

In 1997, an article appeared in the French periodical L’Expansion lamenting the fact that in the early 1980s Renault and Volkswagen (VW), two of Europe’s largest automobile manufacturers, were approximately the same size, but that by the mid nineties, VW had become a world player, leaving Renault far behind in output and world market share (Gallard, 1997). The first half of the eighties were years of crisis for Renault as it teetered on the edge of bankruptcy with mounting losses, a lack-lustre range of models and falling market share, whereas VW expanded successfully. In many ways this article was a commentary on how the two firms had diverged over a relatively short period of time. While VW had grown primarily by increasing volume through its acquisitions of Skoda and Seat (Audi having been bought much earlier) and by expansion in China and Latin America, Renault’s approach was different. Overseas expansion was halted and the firm tried to achieve success through creative model development, raising quality, acute marketing and gaining share in its Northern European heartland. where it found that competition was tough and profit margins thin. (Gallard, 1997).

In the late nineties Renault changed tack and by 2000, it, too, had entered the ranks of globalised companies. Following VW’s example, this was achieved through acquisition rather than by organic growth. Apart from opening a plant at Curitiba in Brazil in 1998, Renault in the following year became the major shareholder in Nissan of Japan, Dacia of Romania and Samsung of Korea, making it the fifth largest automobile company in the world. It had seemingly escaped from its European enclave (MIRA, 2000), These ventures are in their early stages and a great deal of work is required, particularly in the cases of Samsung and Dacia, to raise their levels of quality and competitiveness to world standards. With Nissan the situation is different. It is a mature concern. Renault views the relationship more of one between equals that can generate synergies to their mutual benefit in the long term even if painful reforms have to be undertaken by the Japanese to rescue their company from its difficulties (Fortin, 2001).

The purpose of this paper is not to compare Renault with VW, but to delineate how Renault, from a state of near bankruptcy in the years 1984-85, managed to survive and eventually catapult itself from being the tenth to the fifth largest automotive manufacturer in the world. In essence this involves inquiring into how Renault turned itself round from near insolvency through cost cutting, very precise model development and carefully targeted marketing in the late 1980s and early 1990s. It also involves discussing how even in the early nineties it recognised that future independent survival would be difficult without a long-term partner. This necessitates analysing its failed attempted merger with Sweden’s Volvo when the two seemed a perfect match for each other. Discussion will also focus on how Renault has tried to reform itself internally through improving work practices, opening a state of the art Technocentre and in keeping to the forefront in model development. Finally, there will only be passing references to the company’s attempts to globalise. That subject is too large to be discussed adequately in a paper of this size. Much of what has happened to Renault, however, needs to be contextualised within recent structural and process developments in the automotive industry as a whole and it is to this that discussion turns briefly.

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Renault 1985-2000: From Bankruptcy to Profit

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