The chairman of French carmaker Renault said on Tuesday he expects its South Korean Samsung Motors joint venture to turn a profit by 2004 and to reach full factory output soon thereafter.
“We aim to record a profit by the year 2004,” Louis Schweitzer told a news conference at Samsung’s plant in the southern city in Pusan.
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“We can reach the break-even point with production of 150,000 units a year,” Schweitzer said.
He said the company would invest in sales, marketing and production development in the years leading up to 2004.
Renault took a 70 percent stake in Samsung in late April, breathing new life into the ailing automaker, South Korea’s smallest and youngest.
Samsung said at the time that Renault, the first foreign carmaker to take control of a Korean producer, planned to invest $300 million to expand the operations over a period of five years.
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By GlobalData“We believe we will be able to utilise Samsung’s full capacity of 240,000 units in around 2005,” he said. “About half of the production would be exported.”
Renault’s top executive gave no details of where the exports would go but said about half of the French carmaker’s exports to Asia would eventually come from Renault Samsung.
Samsung, which produces one model, a sedan based on a design from Japan’s Nissan, reported sales of just 3,172 vehicles in the first quarter of this year.
Renault takes over production of Samsung’s SM5 mid-sized sedans formally early next month.
Schweitzer repeated an earlier goal for Renault-Samsung of annual sales of 500,000 vehicles, but again gave no details of how or when this would happen.
He said a key immediate aim would be to keep parts for the joint venture sourced locally.
“We can succeed only when Korean contents are very high,” the chairman said. “To be competitive, we will maintain very high levels of integration.”
He said Renault was interested in developing relations with local parts suppliers, but would not directly invest in them.
“The best way to support (local) part suppliers is to establish good relations over volume, quality and fair price…through long-term contracts rather than directly investing in them,” Schweitzer said.
He said Renault planned to revive Samsung Motors’ technology and development centre.
“The number of personnel in Samsung’s technological centre has been reduced to only 170 now. We plan to increase that number to 1,000,” Schweitzer said, without giving a timeframe.
The research and development activities (R&D) would be operated in the framework of Renault’s or Nissan’s R&D operations, or a mixture of them, Schweitzer said.
Renault became Nissan’s largest shareholder last year after it bought a 37 percent stake.
Schweitzer said Renault had no plans to sell Renault-brand cars in Korea in the near future because Korea’s market for imported cars was too small.
Only 2,401 foreign car were sold in South Korea last year, just 0.26 percent of a market of over 900,000 vehicles.
Renault’s international acquisitions have bolstered its target for output this year to more than 2.5 million vehicles and some four million by 2010, a Renault executive said in May.
Samsung Motors shut the doors on its ultra-modern auto plant in Pusan late in 1998, at the height of the Asian financial crisis. It reopened late last year to resume production of at about 10 percent its annual 240,000-vehicle capacity.
Renault’s partners in the Renault-Samsung auto venture include Samsung Capital and Samsung Card, financial units of the Samsung Group, which hold a combined 19.9 percent.
Samsung Motors’ creditors led by Hanvit Bank took the other 10 percent via a 44 billion won ($39.53 million) debt-to-equity swap.
