Renault Samsung pushes for downsizing

Money-losing carmaker starts voluntary redundancy program for first time


Renault Samsung, the Korean unit of French automotive group Renault S.A., is pushing for downsizing in a desperate effort to overcome its financial difficulties caused by its long sluggish sales in Korea.

The carmaker said Friday that it began accepting applications for early retirement from its employees as part of its 2012 “revival” plan.

It is the first time that Renault Samsung has implemented a redundancy program since the company was launched in 2000.

The company said that those who applied for the early retirement program will be offered retirement payment in addition to a bonus worth up to 24 months’ salary depending on years of service.

About 4,500 out of the company’s 5,500 workers are eligible for the program. The retirement plan does not apply to the 1,000 employees in the research and development team and design team.

The company’s spokesman said the decision was made entirely within Renault Samsung and denied Renault Group’s involvement in bringing up the retirement plan.

“The chairman (Carlos Ghosn of Renault Group) has given us ‘presents for the future’ in design, production orders and so on,” the spokesman said. “But first we need to survive until then, or we won’t be able to benefit from those presents.”

The early retirement program took place amid the carmaker’s relentless struggle against slides in exports and domestic demand.

The company was struck with a disastrous operating loss of about 21.5 billion won ($190 million) in 2011.

The automaker’s year-on-year sales in the first half of 2012 decreased by about 32.8 percent, with a 41.7 percent drop in exports and a 26.1 percent drop domestically.

Auto experts pointed out Renault Samsung’s years-old lineup and the rise of diesel-powered cars, on top of the European debt crisis and subsequent slowdown in Asian economy, account for the main cause of the company’s underperformance.

The restructure move came after Renault Group’s two head figures, CEO Carlos Ghosn and COO Carlos Tavares, paid separate visits to support the Korean unit’s year-long revival plan.

The core of the revival plan, officially titled “2012 Renault Samsung Revival Plan,” includes reinforcement in localization of auto parts, marketing and face-lifting.

Renault Group GEO Ghosn had announced upon his surprise visit in July that the Renault-Nissan auto alliance would invest about $160 million to Renault Samsung’s plant in Busan to manufacture the U.S.-bound Nissan Rogue SUV starting 2014.

The Brazilian-born Lebanese CEO said that the plant will be able to reach its full production capacity, from the current 180,000 units a year to 300,000.

About a month before Ghosn’s visit, Renault Group COO Tavares suggested two revival solutions: launching a new crossover in 2014 and raising the localization rate of auto parts up to 80 percent by 2013.

By Chung Joo-won (joowonc@heraldcorp.com)