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14,600 job cuts announced by Renault around the world, plans to save 2 billion euros

Team OD  | Updated: May 29, 2020, 03:06 PM IST

Renault has announced a new transformation plan whilst announcing its annual results. With this plan, the company plans to reduce fixed costs by more than 2 billion euros over the next three years.  The main reasons that made Renault draft the transformation plan include the drop in sales and profits by the company and the ongoing crisis that has severely affected the automobile industry around the world. Renault's new plans will focus on cash flow generation, have leaner manufacturing practices as well as efficient management of resources.

Renault mentions that for profitability and sustainable growth, it will be doing workforce adjustment, based on  voluntary departure, internal movements along the verticals as well as that based on retraining measures. Close to 15,000 job cuts will be done across three years, wherein nearly 4,600 posts will be from France and the the rest of 10,000 will be from across the world. This will cost the company €1.2 billion.

The company wants to streamline vehicle design and development by reducing component diversity and increasing standardization. It also wants to optimize the use of resources with the concentration of the development of strategic technologies, optimization of the use of R&D centres abroad and increased use of digital as a means of validation for the development of new technologies. All these measures will help the group save approximately €800 million. Additionally, €650 million will be saved by the optimization of production savings. The global production capacity will be brought down from 4 million vehicles to 3.3 million by 2024. Renault has also announced a suspension of planned capacity increase projects in Morocco and Romania as well as further optimize its operations in Russia.

Renault is contemplating having a centre of excellence for electric vehicles and light commercial vehicles in northern France along with the conversion of its Dieppe plant with the end of production of the Alpine A110. With the increase in the efficiency of support functions, Renault plans to save €700 million. Mentioning specifically about the Chinese operations, the Group's stake in Dongfeng Renault Automotive Company Ltd (DRAC) in China will be transferred to Dongfeng Motor Corporation which will stop Renault branded passenger car combustion engine activities in the Chinese market.

"I have confidence in our assets, our values and in the management of the company to succeed with the envisaged transformation and to return our Group to its full value by deploying this plan. The planned changes are fundamental to ensure the sustainability of the company and its development over the long term. It is collectively and with the support of our Alliance partners that we will be able to achieve our objectives and make Groupe Renault a major player in the automotive industry in the years ahead. We are fully aware of our responsibility and the planned transformation can only be achieved with respect for all our Group's stakeholders and through exemplary social dialogue," said Jean-Dominique Senard, Chairman of the Board of Directors of Renault.

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