“The production cost is twice that of the Spanish factory…I need to increase the competitiveness”
Renault Vice Chairman Makes Production Problems Due to Frequent Strikes
Renault Group gave an ultimatum to Renault Samsung Motors. This is a warning that if Renault Samsung’s Busan plant does not increase its competitiveness, it will return the already allocated exports to other overseas plants. For Renault Samsung, if it misses exports, which account for 30 to 40% of its production, it has no choice but to undergo a major manpower restructuring. There are also concerns that the Renault Group may withdraw from Korea.
In a video message sent to Renault Samsung employees on the 9th, Jose Vicent de los Mojos, vice chairman of Renault Group, pointed out, “The Busan plant promised to increase its competitiveness to secure XM3 exports, but it was not implemented.” “I believed in the promise and allocated European quantities of XM3, but the factory manufacturing cost at the Busan factory was twice that of the Spanish factory,” he warned, saying, “If the Busan factory does not keep its promise, we will find a new method.”
The reason that Vice Chairman Mojos, who is the second leader in the group as the executive in charge of manufacturing and supply of Renault Group, has taken the situation seriously at the Busan plant. Renault Group allocated XM3 European shipments to its Busan plant in September last year. At that time, Renault factories in Europe also tried to get the volume, but it is known that vice chairman Mojos and others supported the Busan factory.
The dominant observation that the’new method’ he mentioned on the day would be cancellation of the allocation of supplies and reduction of the size of the Korean business.
Vice Chairman Mojos made problems with the high production cost and frequent strikes at the Busan plant. Looking at the cost competitiveness indicators compiled by Renault Group, the Busan plant was the lowest ranked 17th out of 19 global plants last year. The overall production competitiveness also stayed in 10th. It was ranked first in 2016, but the ranking fell year after year. An industry insider predicted, “The production competitiveness of the Busan plant in the past was in an advantageous position to receive the export volume first, but the competitiveness has recently declined sharply and will face difficulties in the future.”
Vice-Chairman Mojos was also concerned about production disruptions caused by the labor union strike. “It is important to ensure that the XM3 European stocks are not out of time,” he said. The Renault-Samsung union voted for and against the industrial action on the 2nd and passed it (57.1% of approval rate). There are also observations that the union that secured the right to strike will sooner or later engage in a competency event, as negotiations for wages and collective agreements were not completed last year. A company official said, “One of Renault Group’s top priorities this year is the increase in sales in Europe.” “If the strike delays production of XM3, we can cancel the allocation.”
Renault Samsung has been experiencing business difficulties since 2019. Last year, sales volume was 11,6166 units, down 34.5% from the previous year (17,450 units). It is the lowest level in 16 years. It is known that Renault Samsung posted a deficit of 70 billion won last year. It’s been eight years since 2012. The company is also receiving desired retirement for all employees.
Reporter Do Byeong-wook [email protected]
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