Renault bought Samsung Motors to gain a foothold in the Korean market – but the company’s highly advanced and flexible plant is bringing many more benefits. Mark Bursa reports from Busan.
Renault bought Samsung Motors after the Korean chaebols crumbled in the aftermath of the late ’90s Asian economic crisis. It was a speculative buy to some extent – though there was a lot of Renault-Nissan Alliance logic to the deal. And it’s turned out to be a very good investment, thanks largely to the extremely flexible nature of the Renault Samsung plant at Busan, south-eastern Korea.
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The plant’s flexibility was designed in from the start. It was bought as a turnkey operation by Samsung when the group decided to take on Hyundai and Daewoo and enter the car market. The supplier? Nissan. The plant the Japanese automaker built Samsung was even more advanced than any of its own.
“We are building six models and five platforms here on a single line,” said plant managing director Lee Hae-jin. “Nissan cannot do that at any of its plants.” It is this flexibility that is making Busan such a valuable asset for the Renault-Nissan alliance.
A tour of the plant is revealing. As well as the domestic market Samsung models, the line contains Renault Koleos models bound for Europe; Renault versions of SM3 (Fluence) and SM5 (Latitude), for export to Central and Eastern Europe and the Middle East; old-generation SM3s with Nissan Sunny and Almera badges, destined for South American, Russian and Middle Eastern markets, and even a smattering of old SM3s badged Renault Scala – which is how the car is sold in Mexico.
Busan is becoming an increasingly important export plant. In 2009, it shipped 56,200 cars overseas, contributing significantly to the plant’s total output of 190,120 cars. In pre-recession 2008, exports were even stronger, at 95,000. But that figure looks like it’ll be beaten this year.
In the first eight months of 2010, 67,470 cars were exported – and total full-year production will reach 280,000 units, close to Busan’s 300,000 capacity. The plant is running on two shifts – but with around two hours’ overtime per shift it’s effectively running with three. Most Saturdays are full working days too. It’s cheaper to pay the workers overtime rather than hire a third shift.
The line is running faster too – efficiency improvements have pushed the hourly production rate up from 58 at the start of 2010 to 64, since the start of August – the highest cars-per-hour rate in the Renault group.
One reason for the growth in export from Korea is the fact that the cost base is so low – almost as low as China, said Jean-Marie Hurtiger, Renault Samsung Motors CEO. “Korea is a good place to invest without the difficulties of dealing with the Chinese legal and administrative system. And the close integration of Korea and China means you can still benefit from Chinese supplier costs.”
It helps too that Busan is such an efficient, highly automated plant. It’s still only 12 years old and very a much state-of-the-art, fully integrated plant, with stamping shop and on-site engine manufacture.
In the fully automated body shop there are 780 robots, including 51 robots on an “intelligent body assembly” line, where different body shells are assembled without breaking the line sequence. It’s very impressive to see such a variety of cars rolling down the line, from bodyshop to the clean, well-organised final assembly line. The workforce is young too, with an average age of 30. Most of the original 1998 intake is still there – average length of service is 9.2 years.
What happens when the plant hits 300,000? Inside the lobby of the Busan plant you can find the answer. A scale model of the original concept for the plant shows a much more extensive complex of buildings. Such is the layout of the plant that every major shop – body, paint, final assembly – can be duplicated on greenfield land next to the corresponding existing shops. Ultimately, the site could churn out 600,000 cars a year.
This is the reason why Renault-Nissan didn’t pursue a serious bid for failed Korean rival SsangYong. “The price was expensive, and existing investors including Shanghai Automotive would have remained as diluted shareholders,” said Hurtiger. So greenfield development at Busan remains the most likely growth option – but only when the plant is full. Even then, some of the export build could be moved elsewhere in the Alliance, allowing Busan to concentrate on its core Renault Samsung models.
“The concept of building a second plant was designed before Renault came on board,” said Lee Hae-jin. “We need more demand to justify it, but it is part of our strategy, and I hope we will build a second plant in the future.”
It’s important to describe the cars built at Busan as Renault Samsung models – a major change has taken place in that the main models – with the exception of the old SM3 and the large SM7 – now use Renault, not Nissan platforms. New SM3/Fluence is based on Megane platform, while the larger SM5/Latitude is based on Laguna.
With an equally impressive R&D centre and design studio near Seoul, Renault’s Korean venture is growing in significance. The Renault Samsung Technical Centre is the second-largest within the Renault group, after the Technocentere near Paris, and Seoul has the ability to carry out full car designs “We are currently working on four new cars and three facelifts,” said Alejandro Mesonero, RSM’s chief designer. Many of the test cells in the RSTC are state-of-the-art, having been installed as part of a major upgrade in 2008.
In the decade since it’s been in Korea, Renault has successfully used its Korean division to master how to operate successfully in an Asian market. In fact just about the only thing that RSM hasn’t mastered is the correct English phrases to put on its motivational banners at the plant. “Unlimited Dash for Customer Impressive Quality!” screams one giant sign. I think we get the picture.
Mark ‘Coolbear’ Bursa
See also:
ANALYSIS: Big, bold and blinged-up. It’s boom time again for Korea’s car market
