In his eleven years in the driving seat of Renault, Swiss-born Louis Schweitzer has turned the company into a design leader and taken control of Nissan, Dacia and Samsung to build a world Alliance selling over 5m vehicles annually. Tony Lewin spoke to him at the launch of the second-generation Scénic in Stockholm.
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Nissan has become a huge success under Renault’s management. Is there a danger that it becomes the bigger partner and, in some way, the more glamorous company?
We knew from the start that Nissan was bigger: it was 50 per cent larger than Renault when we took it over. There were only nine months during which Nissan was worth less than Renault on the market and these were the nine months during which we negotiated our controlling stake! The day we announced the agreement, this changed. Now, it would be the most stupid thing to try to achieve a better balance by making Nissan less successful. I am not preoccupied with this issue.
Will both marques be full range suppliers for all market segments or will there be some things like 4x4s where it is Nissan only?
No, but you may have strong points and, purely for example, in Europe SUVs are Nissan’s strongpoint and we are a full-line volume market player. In other countries, say Mexico, we are more upscale and Nissan is in the full line value for money sector. Market by market it may be different.
When Carlos Ghosn comes to Paris to take over your job in 2005, will you want to have a Japanese person running Nissan?
He has stated quite rightly that he will have a Japanese COO in Nissan. Carlos will remain Chief Executive; how long will this last is something that will have to be addressed in a pragmatic way.
In cash benefit terms would it not be right to say that the way that Nissan has turned out in its financial performance was almost like winning the jackpot?
A jackpot is a one-time win, and the idea for Nissan is a recurring win which is slightly different. Outside Renault it was considered as a high risk bet which paid off handsomely. The interesting thing is that nobody else was prepared to take the risk. It was not as if there was a bidding contest for Nissan.
Do you take personal credit for it, for having taken that risk and won?
Quite frankly, yes. There is a French saying, attributed to a Marechal called Joffre in the First World War. He won the battle of the Marne during the first German invasion in 1914 and was asked ‘Who won the battle?’ He answered: ‘Well I don’t know who won it, but I surely know who would have lost it!’
How do you feel your new design direction has gone down with the Vel Satis and Mégane hatchback?
Mégane is doing well. Everywhere in Europe the design is a major element of choice. It’s doing what we hoped it would do so we are very happy with it. The Vel Satis was less successful.
Does the failure of the Avantime mean Renault’s ideas of high design have to be toned down a bit?
No I think there are different issues. Clearly Avantime was a niche car and it was meant to attract a small number of people – not a thousand or two thousand a day. Design was a positive and not a drawback for the car. The Mégane is in a segment which is considered even more conservative. Golf is the traditional leader of the segment, and we felt that we had to make a statement on design in the same way that Ford did with the Focus, which did very well. We made our statement with Mégane and it is exceeding its sales expectations.
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But in the future will you take the same risks with design?
I think there is no such thing as a policy without risks. Bland does not mean
success: bland, no risk, is a certain failure – but it can be a very discreet
failure because nobody notices it!
You’ve been strong on safety and design. What about powertrain and chassis?
I believe we are good on chassis, and if we look at the press or what our customers say I believe we are fairly good in [getting] the balance between driving pleasure and comfort – though of course we do not put the same balance in a 2-litre Clio as in a Scénic. Ten to fifteen years ago we were not leaders in engines; we have had issues with reliability of diesel engines, but we have been moving ahead. From the fuel efficiency point of view we are good, but on the gasoline side the issue to be addressed now – as for a number of our competitors – is to find direct injection which really delivers value for the extra cost. To date we have seen more announcements than results. In 1996 and 1997 we, in common with the whole industry, completely underestimated the potential of diesel and overestimated the potential of direct injection gasoline.
How will hybrids and fuel cells fare in the European theatre?
The so-called mild hybrids will bring additional savings, but at a significant
cost because for them to be fully efficient you would need 42 volt batteries.
I cannot see 42 volts not happening eventually, and once it has happened it
would be stupid not to have the mild hybrid. If you look at hybrids in general
the feeling is that from a fuel and cost efficiency point of view diesel is
a better way to achieve it. On fuel cells there seems now to be a consensus
that before 2020 they will not be significant in Europe except if there were
genuine quotas saying you should put out specified numbers of fuel cell vehicles.
Where do you see the limit in terms of diesel share in Western Europe? And will the Americans eventually see sense and go for those newer diesels?
As you know, last year the first meeting of all manufacturers of the world took place in Paris in October. One of the issues was diesel and we made the statement in favour of diesel collectively, but I must acknowledge that amongst the Big Three there were clearly opposed views, not on the potential of diesel, but whether it will catch in the US. I believe at one point in time they will say yes to diesel but I can’t say when.
What
will it take for them to want diesel?
Maybe to find that diesel in some cases is more enjoyable than gasoline. I think it is significant for the US because the price of the fuel in the US is a non-issue. Coming back to Europe, the limit to diesel is that Euro 4 is making it cleaner but more expensive. Euro 5 when it happens will make it still cleaner and still more expensive, which means that the balance between initial cost and cost of ownership will move more in favour of gasoline.
What is your attitude to SUV models?
We have done it in our modest way with the Scénic RX4 and the Kangoo 4×4. You have to accept that if you are mainly a European player, which is what we are, you do not find the volumes to make a lot of money. If you have to amortise all the development costs only on the European market, you do not make a lot of money. So how do we get out of this? First we may use Nissan technology, which means reducing development costs and, secondly, we may use the fact that we are internationalising ourselves which means having other markets than Europe. Yes, I believe we will bring forward an offering, probably in the C-segment, as a 4×4 crossover.
When we look at French companies we often find ourselves comparing you with PSA. Why are your margins less good?
Currently PSA has had a very successful product range with a number of exceptionally successful models, in the same way that the Scénic was exceptionally successful for us. They are at a good point in their product cycle. We are today at a lower point of our product cycle. In the long run there is no reason that the operating margins of Renault and PSA should be significantly different. Of course we do have a little extra which is Nissan.
You talked about your product cycle: what is the average age of your fleet?
It is moving down. I believe with the Scénic it will go down and, with the launches of the Scénic and the full Mégane family, we will arrive at 3.5 years. We want to keep it between 3 and 3.5 years. In our best year for results we were at slightly over 2.5, and in 2001 and 2002 we were in the vicinity of 4.5. You see on average a fairly good correlation, all things being equal.
What are your plans for Dacia? Will it become a key brand for you in Eastern and Central Europe?
The first plan has been to turn the company round, and I think we are moving ahead there, but it’s not easy. To give an idea, Dacia’s labour cost is between 1 and 2 euros per hour all-in, compared with between 20 to 25 in Europe and 40 to 50 in a UAW plant. On the new product we are on schedule: this is the X90, the so called 5000-euro car. And once we have these two things I think we have a good base for expansion.
The Ricardo Quarterly Review, RQ, is a publication prepared by Ricardo in association with TwoToneMedia.
