Renault Article - State of the Company

PARIS (Reuters) - Carlos Ghosn, who takes over as Renault chief executive on Friday, will inherit a car maker in rude health, a far cry from the near-bankrupt Nissan he joined in 1999 and nursed back to profitability.
But despite record profits in 2004 and a model line-up whose quirky design has blown competitors out of the water in recent years, Renault is not immune to tough market conditions which are battering the sector.
Renault has performed better than most of its European rivals in recent years, but it faces problems posed by the ageing of its key models -- the Megane and the Scenic -- and it posted an unexpected drop in sales in the first quarter, with particularly worrying declines in markets, such as Turkey, which were engines of growth in 2004.
Ghosn is expected to spend his first months back at Renault re-acquainting himself with the company he left in 1999, before giving the first indications of his strategic vision for the future in the summer.
"He will likely wait until the half-year announcement to refine his goals for the rest of the year. After that, it is very possible he will set out a three-year strategic plan, like he did at Nissan," Wargny analyst Sebastien Caron said.
He is not expected to make any short-term changes to Renault's target for an operating margin above 4 percent in 2005, after hitting 5.1 percent in 2004.
"We believe Carlos Ghosn ... will be cautious about setting new near- or medium-term financial targets for Renault, given the declining trajectory of the company's key profit generators -- Scenic and Megane," Goldman Sachs analysts said in a note ahead of Friday's annual general meeting.
CLOSER NISSAN LINKS
While renewing his relationship with Renault, Ghosn will also retain his position as head of Japan's Nissan, in which Renault has a 44 percent stake, a situation that could lead to closer links between the two car makers, analysts said.
"For the last five years Renault and Nissan have brought together their processes and their purchasing. They have coordinated their product range plans and their geographical coverage. Now it is time to gather the fruits. Carlos Ghosn should make sure that all the processes in place generate synergies," Lehman Brothers' Jeremie Papin said.
In the medium term, one issue expected to attract Ghosn's attention is its offering in the larger cars segment, where it has struggled to make an impact in recent years.
"One of the main things will be devising a profitability improvement plan for large cars, something which has already been underway," said Commerzbank's Adam Collins, adding that Renault and Nissan could share a platform for a larger model.
So far only the city car Modus, Renault's latest new model, is built on a shared platform.
Sales in the rest of the world are also likely to be an area of focus, as Renault seeks to carve out a stronghold in emerging markets as a buffer against continuing demand drought in Europe.
But there is concern that Ghosn may be spreading his time too thinly and that he risks neglecting some part of his fiefdom as he juggles roles which straddle three continents.
"It remains a key area of concern, particularly so if the changes felt by Nissan increase and if conditions in North America get more difficult -- that could be seen as a distracting influence," Commerzbank's Collins said.
Having sold a record 3.388 million cars worldwide in 2004, Nissan warned on Monday that 2005 would be a tougher year, and said it saw a rise of just one percent in earnings. It also said it would delay by one year a previous target to sell 4.2 million vehicles by the end of a three-year business plan.
Ghosn officially takes over from Louis Schweitzer at Renault's annual general meeting on Friday afternoon. Schweitzer will stay at Renault as chairman

Interview with Carlos Ghosn in Business Week


Carlos Ghosn on His Double Duty

The auto exec discusses how he'll help Nissan hang on to its industry-best profit margins while taking over as CEO of Renault

Carlos Ghosn is about to become one of the world's busiest auto execs. The 51-year-old Brazil native, CEO of Japan's Nissan Motor (NSANY ), will add CEO of Renault (which owns 44% of Nissan) to his résumé. The first job would be enough for most execs and assuming the second one is a huge task by anyone's standards. Ghosn himself admits he'll be taking on these extra responsibilities at a time when business risks are especially great.

Ghosn's last act before assuming double duty was the Apr. 25 unveiling of a new strategic plan at Nissan, called Nissan Value-Up. He's confident the strategy will help Nissan remain the auto industry's most profitable company and allow it to post annual returns on investment of 20% through fiscal 2007. Nissan is also targeting a 24% increase in production, to 4.2 million vehicles a year, by fiscal 2008. Also on Apr. 25, Nissan announced record operating profits of $8 billion -- up 4.4% from a year earlier -- on sales of $79.7 billion.

The next day, in a one-to-one interview with BusinessWeek Tokyo Correspondent Ian Rowley, Ghosn spoke about his plans for Nissan and how he will square them with his new role at Renault -- where he was formerly chief operating officer (see BW, 4/25/05/, "What Ghosn Will Do With Renault"). Edited excerpts of their conversation follow:
Q: What can people expect from Nissan's new "Value Up" strategy?
A: It's not a revolutionary plan. It's evolutionary because you see the same ingredients that were in our previous three-year plan. You see growth -- we'll [produce] 4.2 million cars a year by fiscal 2008 -- and you see top-level performance in operating margins.
Q: How do you respond to those analysts who have criticized Nissan for being too conservative in its forecasts?
A: We've [had] record profits even in these uncertain times. We manage to be very transparent because it's the only way to be consistent. Sometimes the market will be favorable, sometimes it won't. But one thing I'm sure about is that it will always reward long-term performance.
Q: But you accept you've been cautious?
A: I'm not usually cautious. When we announced [our last two] plans, no one could say we were cautious, but at the same time, we're pragmatic. I didn't say I was cautious without giving reasons. I gave five reasons [from exchange-rate volatility to higher interest rates] which no one can contest. From an economic point of view, nobody can predict today how 2005 is going to be.
Q: Last time Nissan launched a new business plan, you promised operating margins of 8%, but this time you're not specifying a numerical target. Why is that?
A: When we announced Nissan 180 [Nissan's previous three-year plan], I knew the company was capable of much more than the 8%. We've since delivered more than 10%, which meant my intuition was justified. Today, I could give you an operating margin forecast of 10%, but that would be ridiculous if the yen-dollar exchange rate went to 130 -- we would be way above. On the contrary, if the yen-dollar rate were to go to 90 and the steel price rose, 10% would be an extremely difficult target.
Q: So are you saying that Nissan's operating margin could fall below 10%?
A: Yes, it may. But it may go up if the environment is better. What I'm saying is that we're committed to being at the top level among global auto makers independent of the environment.
Q: What's the thinking behind your plan to provide 20% returns on investment capital for the next three years?
A: We want our shareholders and partners to know that we're using the company's assets in the best way possible. We're committed to returns of 20% [on invested capital] -- also the highest in the industry -- for the next three years. This gives us justification to grow the company.
Q: Is there still room for more cost-cutting at Nissan?
A: I think 4% cost savings a year for the next three years is a reasonable number.
Q: Can you give an example where you'll make savings?A: We're going to be really using the potential offered by markets like China, Thailand, India, Egypt, and Brazil. One example is our Huadu Plant in Guangzhou, China, where we're establishing production capacity of 270,000 cars. The cost of investment at this plant is half the cost in the U.S. This isn't because it's less automated or the quality is low. The quality is equivalent to the top level within Nissan.
Q: Does that mean you'll be moving production toward lower-cost countries?
A: There's huge opportunity for car manufacturers to use the potential of [those] countries. But it's to complement -- not to substitute -- production. I don't want this to be seen as a threat, it's more an opportunity. As we grow, we'll use more of these resources to add to our existing resources.
Q: Can you use Nissan's relationship with Renault to save costs?
A: Sure. In purchasing we already work together. For instance, when we select suppliers for China, we're doing it for the alliance. When we work together, we can select the best, and it works very well.
Q: Will there be more opportunities once you're running both companies?
A: Yes, but if you do something [where] one company is frustrated or not convinced, you may have a quick win, but it's going to be a long-term loss. I'm not interested in maximizing today's performance to the detriment or three or five years down the road. I'm interested in having a good balance between the short term and long term. That's why I want the spirit of the alliance to be kept alive and strengthened.
Q: How can you manage two big companies like Renault and Nissan simultaneously?
A: It's actually relatively simple. The most important [thing] is to make sure the strategy and the priority in each company is clear. That way, people can make decisions on their own without having to [confer with] anybody else. I'm not going to micromanage. You also have to have a good management team -- people who are performers, not whiners. I'm blessed that on both sides we have performers and not whiners at the top level.
Q: What about yourself?
A: Until December, 2005, I'll spend two-thirds of my time with Renault and one-third with Nissan. That's logical. I know Nissan by heart. I need to reconnect with Renault. It has changed a lot over the last six years. I need to recontact the people and start making my own diagnosis of the company. After 2006, 50% of my time will be with Nissan and 50% with Renault. Physically, it will be 40% of the time in Japan, 40% in Paris, and 20% in other markets, particularly the U.S., which continues to be the most crucial market for Nissan and consequently the most crucial market for the alliance.
Q: At Renault, will you still be able to take a hands-on role -- regularly visiting factory floors and overseas plants -- as you have at Nissan?
A: I don't see myself as someone sitting in a luxurious office in Paris or in Tokyo and asking for reports. To get a sense of a company you have to see the leaders, the plants, and the technical centers, and understand what people feel about the company.
Q: Can you deliver similar levels of profitability at Renault as you have at Nissan?
A: There's a potential for Renault to grow and for Renault to be more profitable. If I didn't believe that I wouldn't take the job. I would've have stayed in Japan and enjoyed the ride with Nissan. Regarding the details, you're going to have to be a little bit patient until I make my own diagnosis of the situation. After three or four months of listening, I'll have a pretty good picture of what's going on. But at the moment, I have one tool -- two ears, and that's it.

Nissan & Renault Coordinate Distribution in Middle East

Nissan importers will start managing sales of Renault vehicles in United Arab Emirates and Oman from April 2005 in a venture to boost commercial synergies within the Renault-Nissan Alliance.

Arabian Automobiles Co. in Dubai and Northern Emirates and Almasaood Automobiles Co. in Abu Dhabi will distribute and service both Renault and Nissan vehicles. Suhail Bahwan Automobiles Co. will handle sales and after sales of Renault models as well as of Nissan models in Oman.

The agreement marks a new stage in pooling the two automakers' commercial resources while keeping brand identities separate. Distribution agreements have been already signed between Renault and Nissan in Bahrain, Kuwait and Qatar, and the strategy is now being reinforced in the Gulf States. The aim is for the partner, which is better established in a given country to support the other

"Car Lit"

'Car lit' helps market new vehicles
Combining automobiles with the world of books is a successful strategy to get message across

MISTY HARRIS
CanWest News Service
Wednesday, April 13, 2005
A person could be forgiven for thinking that reading and driving make strange bedfellows. Perusing a map or revisiting Shakespeare, after all, are activities best done when you aren't cruising down the freeway in rush-hour traffic.
But for the automotive industry, combining books and cars - albeit not at 80 km/h - is proving to be a winning marketing strategy. From Mercedes-Benz's new audiobook sales pitches to Toyota's comic books and Volvo's author readings, it's clear "car lit" is a trend with horsepower.
"Pardon the pun: Using literature is a very novel approach to advertising to reach (customers) on a longer-term basis," said Timothy Gilbert, chairperson of automotive marketing at Florida's Northwood University. "It's a connection not based on the vehicle, the vehicle's history or how many times you come into the dealership for service. It's based on something more esoteric, something at a higher level that's not so mundane."
Car lit can be as highbrow or lowbrow as a marketer chooses.
In the case of Mercedes-Benz, the trend takes on a form combining digital technology with mass-market appeal.
At last week's New York International Auto Show, the company debuted a test version of its iPod-compatible audiobooks. Designed as an alternative to traditional sales pitches, the MP3 books provide potential buyers with an in-depth "walk-around" description of a vehicle's features.
"The approach (marketers) take has to be increasingly sophisticated because the audience is increasingly sophisticated," said Michael Marsden, dean of Wisconsin's St. Norbert College and noted expert on car culture. "I think people will respond very well to this."
Toyota, in contrast, is presenting car lit for young readers.
In a marketing first for a major car manufacturer, Toyota commissioned a comic book aimed at children from 6 to 13 to foster brand recognition. The comic, distributed throughout March in New Zealand, Australia and most of Asia, is supported by research that indicates an average 60 per cent of parents worldwide involve their kids in a vehicle's purchasing process.
"A car is not just a transportation mode, it is a symbol system," Marsden said. "Because of that, (manufacturers and dealerships) want to make those other connections."
One of the more innovative uses of car lit took place in February, when Don Beyer Volvo in Virginia hosted a Pulitzer Prize-winning scribe at the dealership. Edward P. Jones, author of The Known World, was paid $5,000 U.S. to read to about 125 Volvo customers on the showroom floor

Automakers Watching Consumers Online

Consumers posting their criticisms online about the cars and trucks they drive may not realize their views are being closely monitored by the automotive industry. Most of the major automobile companies employ marketing firms to keep close tabs on customer sentiment and how it's being reflected on blogs, discussion groups, listservs, and enthusiast sites.
There is no way to opt out. Like it or not, people who write their opinions online are making their voices heard loud and clear with the big automakers. Meanwhile, Detroit is doing its best to make sure negative perceptions from dissatisfied customers don't sink the reputations of its latest models or its carefully crafted, expensive ad campaigns.
While some Internet users welcome the opportunity to have their views heard by the companies that put them behind the wheel, others are surprised to find their concerns monitored and answered online.
Ken Payne, president of Ford Truck Enthusiasts, noted that Ford posts "sometimes covertly and sometimes overtly" on his site.
"When Ford is a little more open they're received a little better," he said. "We also draw a line on our site between using the site to gather a little information and using it for official market research."
Payne believes the majority of the site's users are aware that Ford is listening. "You always have your occasional guy who's a little paranoid about that stuff," he said. "But most of them like the fact that they have an ear with Ford."
The site's users, according to Payne, influenced the design of Ford's 2004 F150 truck.
Car enthusiasts are invaluable to the auto industry, since some of them seem to guide other users' purchasing decisions.
"In every discussion forum, 10 percent are influencers," Bill Stephenson, director of automotive business development at Intelliseek, said. "Those consumers are resident experts who spend a lot of time in their forum, who others know and trust."
Intelliseek's customers include Ford, BMW, Lexus, and Toyota. The company, which gathers marketing data from the web, monitors 9 million blogs, along with 60,000 discussion forums, Usenet newsgroups, travel sites, and auto sites.
RSS feeds can create particularly pesky problems for automakers, since a negative comment on one blog can quickly spread to a multitude of blogs. Carmakers have responded by creating blogs of their own to influence web users. One recent attempt by Mazda to launch a blog to tout a new product backfired, however, when bloggers realized it was a fake.
"It looked like it was created by a regular consumer, but the bloggers smelled a rat and found it was created by an agency," Stephenson said. "That's a big no-no in the blogosphere. You don't try to pull one over on the bloggers. They are subject matter experts."
To be fair, automakers can't be blamed when they encounter misperceptions and misinformation on the web and feel they need to take steps to counteract the damage.
"A number of enthusiasts and owners were complaining about one technical issue that they felt hadn't been addressed by the company despite them complaining about it for months and months," Jerry Needel, vice president of client services at BuzzMetrics, said. "The enthusiasts were literally taking it to the level of telling people not to purchase the vehicle if they were coming to the forum. The engineers were very surprised because they had fixed it months ago, but it had never been communicated. The enthusiasts felt like they were being ignored. It never made its way to the street." BuzzMetrics has worked with a number of automotive companies, including OEMs, parts companies, and service providers. The firm tries to take the perspective of a consumer researching a car by looking at corporate sites and third-party sites, and trying out Google searches to see what's creating interest in a product, whether positive or negative.
"Clients want to start monitoring buzz before a launch happens," Needel said. "It helps marketers uncover expectations around a vehicle prior to launch. If there are incorrect expectations, they can adjust them."
When there's a product recall, BuzzMetrics tracks the consumer reactions and signs of litigation. BuzzMetrics's biggest client is GM. Its technology uses a spidering engine to find relevant conversations and converts them into a single data format for analysis. The company then has analysts sift through the information using business intelligence tools and compiles the information into market-research reports.
Competitor Brandimensions, on the other hand, runs algorithms to derive a "sentiment score" that describes the emotional connection of the consumer to the brand, and then tracks any change in the sentiment and volume over time. The data comes back to a product manager who writes the final report. Brandimensions finds that on average between 80 to 90 percent of consumers research a vehicle on the Internet before they head to the dealer.
Brandimensions monitors blogs and discussion forums to find where people are talking extensively about a vehicle. When they are asking a lot of questions or spreading a false rumor that could be damaging, they are assigned an alert, which is sent to a contact center that helps the company decide how to engage consumers in that venue.
"We train clients to do it in an ethical and upfront environment," Bradley Silver, Brandimensions's chief operating officer, said. "They establish a relationship with the forum moderator and ask permission to address their requirements."
The effect of this type of outreach can be profound on customers.
"They feel like they're getting superior customer service and being given a voice," Silver said. "You're not there to snoop, but to provide them with a service. Then it translates into something very positive."
Whether it's perceived as positive or negative, the major automakers are keeping close tabs on the Internet to see exactly which direction their vehicles are heading

Stats from The Economist, Survey of Consumer Power, 2nd April 2005

Mini USA

According to Mini USA, 3 out of 10 people who configured a car forwarded it to a dealer and bought it.

Customers who have used the website account for 86% of buyers

36,000 Minis were sold in the US in 2004

Ford USA

In 2000, only 2% of media budget was spent on non-traditional media (inc. internet)

In 2004 20% spent on non-traditional media

Edmunds

Edmunds, a 3rd party car review site, receives 2000 - 3000 independent reviews a week from buyers of new cars who fill out an online appraisal form

New Site for Peugeot 206 in Italy

Promoting the 'Sweet Years' edidtion. Very '70s, retro, with an obvious nod towards Starsky & Hutch. A nice idea within the goodies - insert your own photo to an e-card to give your friends a shock. I can't seem to get it to work, though.

Adverblog is less than impressed.

Volvo Advertises on MSN Blogs (But not very well)

Volvo Praised for Marketing Guts, Panned for Media Choice
14 Apr 2005
Marketing bloggers gave Volvo relatively poor marks for its recent deal with MSN Spaces to sponsor the blog community. Not surprisingly, the industry wags liked the idea of the auto manufacturer engaging in blog advertising, but they noted that MSN's blog platform has a high proportion of largely empty blogs. In essence, Volvo had a good idea, but its instinct to go with the large, well-known brand vendor may have been a mistake. Separately, ClickZ's Zachary Rogers put together a comprehensive run-down of Volvo's relatively innovative marketing tactics.
The review includes items ranging from one of the very first banner ads on the internet to more recent ploys, such as sending a contest winner into space (how safe can that be?).
Nowadays the automaker is using services such as Intelliseek to help measure and manage its word of mouth buzz online.

Automotive Websites Now (Marginally) More Usable

Automakers’ web sites get better, says new survey from J.D. Power
Even though Internet automotive shoppers are more demanding in what they want from automotive sites, they also continue to give record-high ratings to the web sites of vehicle manufacturers, according to a new study from J.D. Power and Associates.
The study measures web site usefulness based on consumer ratings of three main components: relevance, navigation and appearance/presentation.
The study shows an average usefulness index rating of 799 out of a possible score of 1,000 for the industry—up 11 points from a similar measurement taken last fall by J.D. Power.
54% of all new vehicle buyers visit at least one manufacturer’s web site before purchasing a car, truck or sport utility vehicle. The information content provided by manufacturer sites continues to flourish, with the quantity of pictures and videos continuing to increase, according to the study. Many sites now offer tools to help shoppers find the vehicle to best meet their needs. Once bland, lists of vehicle options and features now frequently include pictures, videos and interactive demos explaining the function and benefits of these items, says J.D. Power.
"Manufacturers want shoppers to know how their vehicles will enhance the driver’s quality of life," says Dennis Galbraith, senior director of automotive marketing solutions at J.D. Power. " Manufacturer web sites can deliver volumes of information in ways that are fun and can make even complex safety features easier to understand."
Hummer leads the industry with an index score of 828, based on the 1,000-point scale. Visitors to Hummer.com rate it highly in ease of navigation and consistent aesthetic appeal throughout the site. Also receiving high scores were Acura (821); Honda (820); Pontiac (817); and Cadillac (816).
The J.D. Power study is based on evaluations by more than 11,500 new-vehicle shoppers who indicated they would be in the market for a new vehicle within the next 24 months.

Car Retailer Steps up Search Marketing

Norwich Union Cars

Feature on Carlos Ghosn of Renault