Louis Renault gambles and wins

A leader's childhood
Louis Renault was born into a typically bourgeois Parisian family in February 1877. The youngest of five children, he had two sisters and two brothers. His father, Alfred, a conscientious businessman, had built up a comfortable fortune through the sale of fabrics and buttons. His mother, Louise, the daughter of well-to-do shopkeepers, enjoyed entertaining and the arts.

Louis was a pampered child. At an early age he developed an enthusiasm for all things mechanical, including engines and electricity — everything that surfaced during that era was overflowing with technical progress. The Renault family had a second home in Billancourt, very near to Paris, and it was in a garden shed there that the young Louis set up his first workshop. Studies were not his strong point and he was more than content to pass his baccalauréat. But the quiet teenager had two vital assets for getting on in life: he was both intuitive and practical.

New vehicle moves into gear
At the age of 20, he made a brilliant entrance into the emerging world of the motor car. He converted his De Dion-Bouton tricycle into a small, four-wheeled vehicle and added another of his inventions that would soon propel the motor car into a new era: the 'direct drive', the first gearbox. It instantly dethroned the transmission chains and cogs that had been used until then.
On December 24, 1898 Louis was spending Christmas Eve with some friends. Confident about his invention, he bet them that his vehicle could climb the 13% slope of the Rue Lepic in Montmartre. Although they were incredulous at first, his friends were soon forced to believe their eyes. Not only did Louis win his bet - he also pocketed his first 12 firm orders, along with cash deposits. His career was under way. A few months later he filed the patent for the direct drive system that would make his fortune. It was soon adopted by all the manufacturers of the time.

A string of firsts
His two brothers, Marcel and Fernand, who ran the family business prudently, set up the Renault Brothers company in 1899 - with a small amount of capital and without including their talented sibling. They left Louis the ownership of his patent and paid him a good salary on condition that he show results. In fact, Marcel and Fernand were dubious that the sideline had much future... But Louis was very soon to prove them wrong.
It was through racing that Renault Brothers became known, with Louis and Marcel at the wheels of their vehicles. Starting with the Paris-Trouville event in 1899, they chalked up win after win in most of the city-to-city races, including Paris-Bordeaux, Paris-Ostend, Paris-Berlin and, most important, a magnificent Paris-Vienna won by Marcel in 1902.

Rapid growth
Those victories were the most effective form of advertising and direct marketing that the brothers could have wished for. An admiring public made their order books fatter with every race.
The cars were sold for 3,000 francs - the equivalent of ten year's average salary at the time. The company expanded rapidly and the workshops by the Seine were forced to expand with it. By 1902 they covered 7,500 square metres. The Renault catalogue included several models, including the first saloon car on the market. In the same year Louis introduced the first Renault engine, with four cylinders and horse-power of 24. Soon after he patented the first turbo.

The end of an era
In 1903 a tragedy occurred: Marcel was killed in an accident during the Paris-Madrid race. He was 31. The race, which had already claimed six other lives and left about 15 people injured, was called off by the national organisers. It was a hard blow for Louis, who lost not only a brother but also his most loyal supporter. He gave up racing for good and passed on to professional drivers the task of defending the Renault company colours, in France as well as North Africa, the United States, Cuba and South America. It was also around this time that Fernand started to establish the Renault Brothers sales network and to set up the company's first subsidiaries abroad — in England, Belgium, Italy, Germany, Spain and the United States.

An unstable world

The Americans' lead
In 1919 Louis Renault assessed the gap that separated European automobile manufacturers from their American rivals. The United States, which was not involved in the war, had already entered the consumer era. Thanks mainly to Ford, which was mass-producing inexpensive vehicles, more people could afford cars, and making them had become a major industry with repercussions on the national economy. In France, the motor car was still regarded as a luxury and was heavily taxed, which was holding back its progress. The golden age of the French automobile was a thing of the past.

The weapon: 'A large-scale organisation'
After the first recession that rocked the world economy in 1920-1921, Louis Renault reorganised his business. He set up the Société Anonyme des Usines Renault (SAUR), sold a stake in the company to a bank and worked out his view of 'a large-scale organisation' that would be strong and independent, a sort of autarkical stronghold that could face up to the competition and stay afloat when the economy was going through a depression. Like Ford, which had gone as far as buying its own railroad, the SAUR became an 'all-in-one' firm with an extraordinarily varied range of production units and sites. This is known as 'vertical concentration' - the exact opposite of Renault today, which focuses on its core business of making cars and buys in about 80% of the components.

Renault was everywhere
Peace, with lost time to be made up for and needs to be satisfied in many areas, gave Louis Renault a tremendous boost of creativity. He manufactured everything that had an engine: cars, light commercial vehicles, vans, buses and trucks, farm tractors (whose caterpillar tracks were inherited from wartime tanks), ships' engines, motor units, railcars and, of course, aeroplane engines. To supply the workshops, he acquired his own foundries, ironworks, sandpits, forests and sawmills, enabling him to make everything that would reduce his dependency on other companies: steel, cardboard, electrical equipment, industrial rubber, oil and lubricants. He did buy in components when they were cheaper than those he could make himself, and of the required quality.

The factory island
The Billancourt plant was at the centre of the system, but its labyrinth of workshops did not allow vehicles to be mass-produced, American-style. In Paris, on the other side of the River Seine, André Citroën already had a modern factory complete with assembly lines, which were not introduced at Renault until 1922. Louis Renault built his big factory on Seguin Island, Billancourt, where he had been planning to lay out recreation areas for his workers. After a long series of legal manoeuvres, he managed to buy plot after plot of land... except for one which the owner stubbornly refused to sell him. No matter, the first assembly line started working in 1929 and the factory was completed in 1937.

The end of an illusion (1929-1945)
At the summit of his glory, Louis Renault was completing his lifetime's work but he was no longer in tune with the times. And in 1940, he did not understand the shape history was taking. When he died in 1944, his company was nationalized for being 'an instrument of the enemy'.

The end of an era

The effects of the Wall Street crash
Europe was hard hit by the repercussions of the recession in the United States, which had a knock-on effect all over the world. The automobile industry, which was highly sensitive to economic disorder, had to find a new strategy. American manufacturers, who accounted for 89% of world production, carried out mass sackings. They also learned to produce more efficiently and at less cost, and started expanding abroad. In Europe, governments played a vital role in defending and promoting their national brands through a series of measures focusing specifically, as in France and Italy, on taxing imported vehicles heavily.

Renault's response to the crisis
To cope with the crisis, Renault made a major productivity and cost-cutting effort while reducing salaries and staff numbers, which also led to strikes by rota. Meanwhile the company stepped up the diversification of its production, particularly in public transport vehicles such as buses and electric railcars. But it also relied on orders for weapons, mainly by developing the aeronautical side of the business. Louis Renault bought Caudron, acquired a stake in Air France and helped to set up Air Bleu for postal transport in France.

The arrival of small cars
In Italy, Germany and the United Kingdom, automakers had understood that if they were to survive they would have to make affordable cars for a wider public. They counted on small cars that were inexpensive to buy and to run. The Fiat 500 and above all the legendary Volkswagen designed by Ferdinand Porsche were to enjoy a spectacular degree of success. In France, despite government pressure, Renault, Citroën and Peugeot underestimated demand and failed to reach an agreement on a joint 5CV proposal. Peugeot eventually took over the vehicle with the 202. It was only after the war that France saw the arrival of the true 'people's car'.

The end of a great créateur
In 1934 Citroën launched front-wheel drive - a feat of technology, innovation and daring. But André Citroën had more foresight than management skills, and he filed for bankruptcy when the banks finally abandoned him. He died the following year. The French government urged Louis Renault to take over the company run by his fiercest rival, but he refused. The two firms were miles apart culturally as well as financially, and Louis Renault was doubtless apprehensive about trying to merge them. In the end it was Michelin which took over the reins of Citroën.

Labour relations deteriorate
The deflationary measures introduced to deal with the crisis increased tension in labour relations. In February 1934 an anti-parliamentary demonstration in Paris left 17 people dead and the unions called for a one-day strike. At Billancourt, two people were killed when police intervened.
By 1935 France had more than half a million unemployed. National automobile production plunged by 35% compared to 1929. With few orders coming in and export markets closing, Renault cut the working week to just 30 hours. Louis Renault, an authoritarian style of boss of the old school, was not one to negotiate his way out of a dispute.

Renault, a bastion of the workers' struggle
After the People's Front won the parliamentary elections in April 1936, the trade union protest movement continued to grow, gradually bringing all sectors of the economy to a halt. With the highest concentration of strikers in the country assembled at Billancourt, Renault became the core of the workers' struggle in France and remained so for some time. In that same year, 1936, production reached a record of 61,146 vehicles, yet the SAUR (Renault factories' limited company) recorded a large loss, the first in its history.

Renault, a State-owned company (1945-1955)
In 1945, after five years of foreign occupation and hardship, France enters into a period of post-war reconstruction. Renault is emblematic of the nationalization programme launched in the country's main sectors and meant to put France's economy back on its feet.

Billancourt comes back to life with the 4CV

A Chairman with an iron fist
On January 16, 1945, an ordinance established that the Société Anonyme des Usines Renault was to be nationalized, becoming the Régie Nationale des Usines Renault (RNUR). The French government appointed Pierre Lefaucheux as the company's first Chairman. Engineer and graduate of the prestigious Ecole Centrale, active in the Resistance and with a strong industrial background, this energetic, enthusiastic leader of men quickly settled into this prominent role. He won a first major victory for the future of the company when the new state authorities having decided that Billancourt would concentrate solely on the production of trucks, he managed to gain authorization to manufacture passenger cars as well. Despite a difficult time getting the plant back into working order, the 4CV project was launched.

The 4CV
Outlined while France was in the throes of war, and finalized during the post-war rationing period, this little 'everyman's vehicle', designed by the engineer Ferdinand Picard, was sturdy, discreet and inexpensive. Pierre Lefaucheux was convinced that small cars were the best way to revive the country's automobile industry. Other manufacturers, such as Citroën, Fiat, Morris and, of course Volkswagen, also took this direction, launching their own small cars. The 4CV (760 cm3) was unveiled at the first Paris Motor Show in 1946 and its mass production, which began the following year, continued up through 1961. The car's huge success far surpassed all expectations. Exported from 1947 onwards, the 4CV was the leading source of foreign income.

Transfer machines
During this time, the company was equipped with transfer machines, high-performance work tools for engine block machining. They were designed by Pierre Bézier, a Renault engineer who, while a prisoner of war in Germany, improved upon the automatic machine principle introduced before the war by GM (General Motors). With their multiple workstations and electromagnetic heads, these mechanical monsters, precursors of robots, made it possible to perform a variety of different operations consecutively on a single part by transferring it from one station to another. The RNUR sold a number of these machines to competitors in France, the USSR and even the US. Bézier was later responsible for designing the famous curves used around the world for CAD (computer-aided design).

Renault at the heart of labour unrest
Despite the reforms undertaken within the framework of the company's modernization and equipment plans, France's economy remained unstable. Shortages and necessities linked to the country' reconstruction efforts lead to inflation and labour unrest. 1947 was marked by strikes and violent demonstrations, especially at the Régie Renault, and the government's Communist-party ministers were forced to resign. Renault, a company in which the CGT union was predominant, became a bastion of worker struggle and unrest, despite the fact that Pierre Lefaucheux was a Chairman open to labour relations (he was the first to set up a Works Council and to open the Board of Directors up to staff representatives).

Export - an economic necessity (1955-1975)
Headed by Pierre Dreyfus, the Régie Renault pursues its development and consolidates its position as the leading national firm. However, with insufficient preparation, it fails to gain ground on the U.S. market.

Corporate planning and export

A high-ranking civil servant becomes an industrialist
When Pierre Dreyfus replaced Pierre Lefaucheux at the Régie Renault on March 27, 1955, he was no newcomer to the company, as he had been its vice president since 1948. His goal was to prove that a nationalized company was 'as much of a fighter as a private one, and just as successful'. He based his strategy on two main ideas: corporate planning, in order to clearly define the direction the company would take and how it would get there, and exporting half of the company's production, to ensure growth. But before he could do this, he would need to restore peaceful industrial relations.

The Régie Renault, a leader in social progress
Pierre Dreyfus wanted the leading national firm to be exemplary in every way. As early as September 1955, he signed a first corporate agreement ensuring open discussions with the unions and introduced another innovation - a third week of paid holiday. Also in 1955, he raised salaries by 4% and established paid bank holidays and complementary retirement insurance. Renault became a stronghold of social progress as well as a symbol of protest during the social upheavals of May 1968.

Concentration in the heavy goods sector
While Pierre Lefaucheux had begun negotiations, it was Pierre Dreyfus who finalized the agreement which brought about the merger of two heavy goods manufacturers, Latil and Somua, with Renault trucks, creating a new entity, the Saviem. This company was in competition with Berliet, a company which had entirely refused negotiations with the Régie Renault. This situation would soon change, and in 1974 Berliet would join forces with Renault to establish a major player in the heavy goods sector.

The Dauphine takes over
The 4CV was ten years old. Its successor, the Dauphine, launched in 1956, would become an instant success both in France and abroad. Starting in 1957, the Dauphine sold extremely well, far beyond all expectations, on the vast U.S. market - considered by Pierre Dreyfus to be essential to the company's growth. To accommodate the U.S. demand and ship the cars across the Atlantic, Renault created the CAT (Compagnie d'Affrètement et de Transport) freight transport company. In 1959, more Dauphines were sold in the U.S. than were Volkswagen Beetles!

The end of the American dream
Faced with the success of small foreign cars at home, the United States began importing cars manufactured in Europe by their own subsidiaries. In addition, the nascent economic recession began to take its toll on the automobile industry as a whole. The Renault distribution network, set up in haste and lacking any stable partners, soon began to show its weaknesses. As did the Dauphine itself, which proved insufficiently robust. Sales nose-dived, stock was sold off export shipping activity to the U.S. ceased. In 1960, the Régie Renault was faced with the first serious crisis in its history.

Repercussions
The crisis would have strong repercussions on both a financial level - debts needed to be paid off - and industrially - production was thrown completely off balance - but most importantly in the social realm, when a series of major labour strikes hit the plants after the laying off of 3,000 employees in France and Belgium. The recession only made matters worse and the tensions would only begin to let up with the arrival of new social advances at the end of 1962 - a fourth week of paid holiday, additional time off for seniority, etc.

Skyriding and nose-dive (1975-1985)
In December 1975, Bernard Vernier-Palliez took the reins from Pierre Dreyfus at the head of Renault. With the European market paralysed by the oil crisis (sales down by 40%) Renault would step up its partnerships policy and broaden its business outlook.

Ambitious expansion

The Renault landscape
By 1975, Renault had become an industrial group made up of the original carmaker company RNUR along with various subsidiaries giving a diversified business outlook. The total group workforce numbered 222,500, including around 104,000 at RNUR. Immigrant workers accounted for over 21% of the personnel.
In 1975, Renault plants made 1.3 million passenger cars, including over 400,000 in European countries other than France (Spain, Belgium and Romania) and 130,000 outside Europe (Turkey, Australia, South Africa, Argentina, Colombia, Iran, etc.). The group also made 99,000 industrial vehicles, around 60,000 Saviem-Berliet trucks, 14,000 tractors and 112,500 special vehicles.

Scope of expansion
Mr. Vernier-Palliez continued his predecessor's diversification policy, now considered vitally necessary to combat the automotive industry slump caused by the oil crisis.
Even so, he discontinued certain peripheral business operations (in the agro-food industry, chiefly), which instead of freeing up cashflow were in fact proving ruinous.
On the other hand, he stepped up industrial partnerships on vehicle assembly and distribution, supported by startup of the Grand-Couronne plant, specializing in CKD (completely knocked-down) kit production. Partnerships were forged in Portugal (assembly and powertrain plants), Turkey (acquisition of Oyak plant) and, at a smaller scale, in countries like Thailand and the Philippines. Renault was pushing outwards geographically.

The American dream, again
Undeterred by the failure of its previous American foray, Renault still entertained hopes of US development. Lacking the financial resources to build industrial facilities and a dealer network of its own, it sought cooperation with well-established local manufacturers, through equity holdings.
Two major commercial and financial agreements were signed in 1979, with AMC (American Motors Corporation) on passenger cars and with Mack on heavy goods vehicles. In addition, an agreement was signed with DeLorean for supply of Renault gearboxes and V6 engines. Joint ventures included Cybotech, a US robotics company formed with Ransburg Corp., and Renix Electronique, an automotive electronics company formed with Bendix.

Spectacular Formula One entry
Very much aware of the communicative power of successful motor sport performance, Renault set up Renault Sport in 1976. The Dieppe plant then went on to make the famous Alpine series that would excel in rally racing and on the racetrack too (as proved by the A442B V6 Turbo at Le Mans in 1978).
Encouraged by its excellent rally results, Renault felt irresistibly drawn to the most demanding of motor sports: Formula One. When Renault's first Grand Prix racer, the RS01, appeared on the starting grid of the UK Grand Prix in 1977, its bizarre design and turbocharged engine raised little more than a giggle. Two years later, at the Dijon track, Renault had the last laugh when Jean-Pierre Jabouille finished first in the 1979 French Grand Prix. This was the first Formula One victory for a turbocharged engine, but it certainly wouldn't be the last. Indeed, most of Renault's F1 rivals would end up following the Renault lead in adopting turbocharged engine technology.

Renaissance: 1985-1992
Georges Besse lost no time putting Renault back on the road to recovery, but only at the expense of tough measures that would prove unpopular among the workforce and attract the wrath of far-left fanatics who would stop at nothing, not even murder.

Painful recovery

The man for the job
The French government gave Georges Besse 'carte blanche' to restore Renault's flagging health. This larger-than-life character (in every sense) was a graduate of France's prestigious 'École Polytechnique' engineering school, and had earned a solid reputation as a front-line player in France's nuclear programme and as the mastermind behind the successful reorganization of Péchiney. Preaching an absolute abhorrence of waste ('a franc is a franc'), he administered a very radical treatment.

Return to sobriety
Besse brought an end to his predecessors' extravagant diversification policy, and set about replenishing the company coffers by selling everything that could be sold, including the plush Champs-Elysées building, the Renault Mexico head office, Micmo Gitanes, Europcar, Société de Fonderie et de Mécanique de l'Est, and Renault shares in Renix and Volvo Car Corporation. The project for automating the production lines at the Moskvitch plant in Moscow was dropped, and Renault pulled out of cycling and Formula One racing (though it continued making engines for the Ligier, Lotus and Tyrell teams).

21,000 lay-offs
The toughest problem facing Besse was union opposition to his workforce reduction plan. Renault was struggling under the weight of chronic overstaffing, with a workforce of 213,700 at the end of 1984. Bernard Hanon before him had planned a workforce reduction of 5000 for autumn 1984, but the measure had not gone through; approval from the socialist government of the time had been late coming, and union pressure had proved daunting. But the measures announced by Georges Besse in 1985 were indeed enforced: the Renault workforce was cut by 21,000 over a period of two years, through early retirements, voluntary assisted repatriation for immigrant workers, and lay-offs.

Labour unrest
These measures, which also applied to the industrial vehicles division, inevitably met with discontent, though strike calls by the CGT, then the prevailing trade union at Renault , were not always followed. Indeed, ten union members were expelled following serious incidents at the Billancourt plant, and were not reinstated. Mr. Besse never broke off talks, calmly refused to be intimidated and his authority steadily grew as the CGT's dwindled.

Georges Besse assassinated
By the end of 1986, Georges Besse had already managed to halve the Renault deficit. This was a good start, though it only went part of the way to accomplishing the mission taken on. But it made Besse a target for the violent 'revolutionary' gangs responsible for a wave of terrorist attacks in France at the time. When Besse left his chauffeur on the evening of November 17, 1986, he was shot down by two young women, members of the far-left Action Directe terrorist group. They, and their two accomplices, were arrested a few months later. Raymond-Haim Lévy took Besse's place at the head of Renault.

Renault's new identity (1992-2005)
In mid-1992 Raymond H. Lévy reached retirement age and stepped down to make way for his chief financial officer Louis Schweitzer, a former senior civil servant who had joined Renault six years earlier. Despite his rather atypical profile for a captain of industry, Renault's new boss would spearhead a major change in scope.

Freedom and responsibility

First difficulty: alliance with Volvo
Louis Schweitzer took the helm of Renault at a critical period: Renault's fortunes were sagging while Volvo was on the road to recovery. Three fundamental errors would combine to scuttle plans for an alliance between the two companies:
- Political error from successive French governments, left and right, who would repeatedly postpone privatization for fear of trade union conflict;
- Error of judgement from Renault, who underestimated the cultural differences in business relations and working practice between the would-be partners in France and Sweden;
- Tactical error, with the three-year interval between initial signature and merger announcement leaving plenty of time for dissent to muster on the Swedish side.

Merger breakdown

On 6 September 1993 it was announced that Renault and Volvo would merge on 1 January 1994. The statement aroused hostility in Sweden, led from inside Volvo by opponents to CEO Pehr Gyllenhammar, and from outside Volvo by an association of small shareholders. One by one, the large shareholders pulled out. Lacking support from his board, and from the majority of the Volvo executives, Mr. Gyllenhammar resigned on December 2. The merger was dead and buried.

Privatization

The failed merger raised an acute awareness of Renault's vulnerability -'too small, too isolated and too French', to quote one headline of the time-, and Louis Schweitzer would urge the French government to proceed with privatization.
A first step was taken in 1994, with an initial public offer. The French state reduced its stake to 52.97%, Volvo kept its 11.4% share, and the rest of the Renault stock was taken up by the public and by the Renault personnel, who subscribed massively.
The second phase followed in 1996, with privatization. A stable core of major shareholders formed to take 11% of the Renault equity, and the French state became a minority shareholder, with 45.87%.
The French government's stake in Renault today stands at 15.7%.

New growth openings

With its new-found agility and capacity for manoeuvre, Renault would at last be free to pursue the development that had become so necessary.
Since 1995, Louis Schweitzer had been eager to go out and seek growth where economies were actually growing, namely elsewhere, in emerging-economy countries, away from Europe, the USA and Japan.
The two pillars for Renault's international growth would be Turkey, with reinforcement of Renault's existing industrial and commercial infrastructures, and the Mercosur, with modernization of the Córdoba plant in Argentina and a Brazilian site chosen for construction of Renault's first new production plant in twenty years.
In these countries, Renault would also be releasing its most recent models, to European standards.

European base

Renault would nevertheless need a sound European base to weather fluctuating growth conditions in emerging-economy countries. But competition in Europe was at its fiercest, and after reporting losses of over 5 million francs in 1996 (Renault's last year in the red) Renault realized the need to improve its competitive performance, making better products faster and less expensively.
Carlos Ghosn, Renault's new number-two since autumn 1996, would push ahead with modernization, introduce a radical cost reduction plan, and rationalize Renault's production system by redistributing manufacturing operations across the company's many sites. Rationalization would include closure of the Vilvoorde plant in Belgium, a decision taken by Louis Schweitzer in 1997. The closure announcement would spark off the first Eurostrike, but Renault would honour its commitments to the site workforce of 3100, with retirement plans and offers of alternative employment for all laid-off personnel.

Centenary and rejuvenation

Under the slogan 'Renault, a hundred years of driving innovation', Renault celebrated its centenary in 1998 by opening two major sites.
The Renault Technocentre at Guyancourt, near Paris, would be the driving force behind Renault competitive performance, accommodating Renault's 6500-strong engineering and design personnel. Henceforth, all new Renaults would be designed and developed at the Technocentre.
The Scénic bodywork-assembly plant at Curitiba in Brazil would be the first unit in a huge complex, soon to include a powertrain plant and a light-commercial-vehicle assembly plant.

Source: Renault

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