Renault, from Diversified Mass Production to Innovative Flexible Production

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Freyssenet M., “Renault, from Diversified Mass Production to Innovative Flexible Production”, in Freyssenet M., Mair A., Shimizu K., Volpato G. (eds), One Best Way? The Trajectories and Industrial Models of World Automobile Producers, Oxford, New York, Oxford University Press, 1998, pp. 365-394. Digital publication, freyssenet.com, 2007, 555 Ko, ISSN 7116-0941.

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Abstract

A cursory review of the history of Renault, combined with a glance at a few statistics and quotations, might lead one to believe that towards the end of the 1980s the French carmaker made the transition from a Fordist model to a 'lean production' model, which is proposed by the authors of 'The Machine that Changed the World' as the model for the 21st century. Yet Renault tried to be a Fordist company, but never succeeded. Still less did it now conform to the idea of 'lean production'. In fact during the 1960s the company had adopted the Sloanist industrial model, named after Alfred Sloan, who developed it and later theorized it while CEO and then President of General Motors. The Sloanist model can best be summarized as follows: the mass production of a diverse automobile product range which share many components in common, within a framework of a wage compromise negotiated with trade unions which guarantees the regular increases in the purchasing power of the workers, in return for which the latter accept the particular form of work organization associated with it. Renault adopted this model in an environment characterized by strong growth in demand, shortage of labour, and a crisis of work. Yet the model was never really mastered, and the attempted transition towards it brought a significant rise in production costs. The difficulties Renault encountered at this point might potentially have led to innovative solutions. But the abandonment of fixed exchange rates and the first oil crisis led to a breakdown in economic growth in several of the industrialized countries and prematurely transformed the automobile market in France into a replacement market.

During the following years, Renault sought to reestablish profitability without questioning its industrial model, that is, following a strategy based on volume and a broader product range. After a brief attempt to seek renewed growth in the countries producing primary materials, the company attempted to take market share from other producers in the industrialized countries, particularly in the United States, at the same time diversifying its activities beyond the automobile sector. Fleetingly, Renault became the largest carmaker in Europe. However, this was attained at the cost of growing indebtedness, and with no solution having been found to the crisis of work and the new problems of product design and manufacture which stemmed directly from the broader product range. Measures adopted to transform the wage compromise and reduce costs came too late to prevent a situation of near bankruptcy for Renault.

After Renault had drastically reduced its breakeven point in 1985 and 1986, management got the French State to play its role as the sole shareholder. The company then adopted a profit strategy in which the company's products were to be positioned at the upper end of each market segment, based on their quality and price, and of designing commercially innovative products, each with its own 'personality'. To create the conditions necessary for this strategy, a new social compromise was created. On the one hand, working time became flexible and worker's became more fully involved in the improvement of performance. On the other hand, the content of work was enriched, careers were guaranteed, and employees gained a financial interest in the company's results. Renault thus began a transition towards an industrial model characterized by innovation and flexibility (Boyer and Freyssenet forthcoming). The group was profitable for nine consecutive years, significantly improved the quality of its products, designed a new product range, eliminated its debt, and transformed itself into a private enterprise. And yet the 1993 recession and the failure of a planned merger with Volvo would pose severe tests for the strategy and forced decisions to be taken about the product range which might well prove contradictory with it.

Content

1. Renault delects the sloanist model from the mid 1950s, and succeeds in adopting it during the 1960s

2. The crisis of work and problems in production, in a context of strong growth, internationalization and the diversification of output, 1965-73
2.1 The doubling of volumes and the broadening of activities is accompanied by a rise in the breakeven point
2.2 The crisis of the wage compromise
2.3. The difficulties of flexibilization and coordination caused by the variety of production and diversification of activities

3. Three attempts to re-establish profitability, still by increasing volumes and diversifying activities, 1974-84
3.1. The search for markets in countries producing raw materials, the pursuit of diversification, and the deterioration of relations with the CGT, 1974-7
3.2. A new direction: the end of the 1950s wage compromise and attempts to invest in the United States, 1978-81
3.3. Further changes of direction: plans to increase capacity and reduce the break-even point, but they come too late, 1982-4

4. Financial recovery and the rapid transition to an industrial model focusing on quality, innovation and flexibility instead of volume and diversity, 1985-94

4.1. The ten years that changed Renault
4.2. Recovery through debt reduction and lowering the break-even point, 1985-7
4.3. A new profit strategy, the search for an industrial model to support it, and preparing for the future through partnership with Volvo, 1988-92
4.4. Future prospects: Renault's profit strategy is tested by recession and by the failure of the Volvo merger

Key words

Automobile, Automobile industry, Renault, Nissan, Volvo, AMC, Alfa Romeo, employment relationships, team working, team leaders, maintenance, automatized workshops, reform of work, social conflicts, automatization, growth mode, profit strategy, productive models, employment relationships, productive organisation, product policy, company governance compromise, work crisis, alliances, internationalization, cost reduction, innovation, flexibility, just-in-time, japanese model, lean production, speculative bubble

Concerned disciplines

Economics, Management, Geography, History, History of Sciences and Technologies, Engineering, Sociology.

Writing context

Contribution
to personal questioning
to scientific reflexion of research laboratory or network
to national and international scientific debate
to diffusion of scientific results
to implementation of scientific results

References, commentaries, critics

Curent relevance

See also

✔ Freyssenet M., Mair A., Shimizu K., Volpato G. (eds), One Best Way? The Trajectories and Industrial Models of World Automobile Producers, Oxford, New York, Oxford University Press, 1998, 476 p.

✔ Freyssenet, M., “Renault, une stratégie d’ 'innovation et flexibilité' à confirmer”, in ✔ Freyssenet M., Mair A., Shimizu K., Volpato G. (dir.), Quel modèle productif? Trajectoires et modèles industriels des constructeurs automobiles mondiaux, La Découverte, Paris, 2000, pp 405-440. Édition numérique, freyssenet.com, 2007, 680 Ko, ISSN 7116-0941.

✔ Freyssenet M., “Renault: Globalization, But For What Purpose?”, in ✔ Freyssenet M., Shimizu K., Volpato G. (eds), Globalization or Regionalization of European Car Industry?, London, New York, Palgrave-Macmillan, 2003, pp 103-131. Édition numérique, freyssenet.com, 2007, 380 Ko, ISSN 7116-0941. En anglais par un éditeur anglais en première publication.

✔ Freyssenet M., Renault, une mondialisation pour quoi faire ?, version française originale de ✔ Freyssenet M., “Renault: Globalization, But For What Purpose?”, in ✔ Freyssenet M., Shimizu K., Volpato G. (eds), Globalization or Regionalization of European Car Industry?, London, New York, Palgrave-Macmillan, 2003, pp 103-131. Édition numérique, freyssenet.com, 2007, 360 Ko, ISSN 7116-0941.

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2007.04.04

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2007.04.04, Freyssenet M., “Renault, from Diversified Mass Production to Innovative Flexible Production”, in Freyssenet M., Mair A., Shimizu K., Volpato G. (eds), One Best Way? The Trajectories and Industrial Models of World Automobile Producers, Oxford, New York, Oxford University Press, 1998, pp. 365-394. Digital publication, freyssenet.com, 2007, 555 Ko, ISSN 7116-0941.

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