Renault may drop plans to set up plant in Chennai

Chennai/Mumbai, French car maker Renault has said that it is reviewing plans for its factory in Chennai and may even completely abandon the project.

Renault’s Chief Financial Officer, Mr Thierry Moulonguet, was quoted in a Bloomberg report as saying that the company is reviewing plans for the Chennai plant. “It is possible that we abandon the project completely.” It depends on market conditions. Renault would recoup its share of the €700-million investment and leave Nissan to build a smaller, cheaper facility alone, the Bloomberg report said.

However, Renault officials in the country say that the company will continue to be present in India. Renault produces the mid-size sedan Logan through its joint venture with Mahindra & Mahindra at Nashik in Maharashtra. The company is likely to produce the Logan derivatives, the Sandero hatchback and Steppe station-wagon at Nashik.

In December 2008, Renault and Nissan said that they would go in for one shift at the Chennai plant rather than the initially planned two, due to the economic slow down. In January, Renault officials said in Paris that plans for the Chennai plant were only being put on hold and not shelved.

Renault and its Japanese affiliate Nissan are investing Rs 4,500 crore in an equal joint venture for a four lakh a year capacity car plant at Oragadam, near Chennai. The two signed an agreement with the Tamil Nadu Government in February 2008, which provided them incentives. Work on the plant started in June 2008 and the first line is expected to be ready in the first half of 2010.

Nissan is separately setting up a plant to make light commercial vehicles in a joint venture with Ashok Leyland near Chennai, which too has been put on the backburner.

When contacted, a State Government official said the Government had not heard from Renault about its plans to shelve or slow down the project. The agreement provided for the companies to make the investment in stages over seven years. Those in the know say that work relating to Nissan’s side of the plant is on in full swing and slow as far as Renault’s line is concerned.

Renault, which is getting €3 billion as loan from the French Government, said that its focus for 2009 would be to cut costs and reduce capital investment. The company would focus capital expenditure and research and development programmes on strategic projects, including electric vehicles and environment-friendly engine performance, a press release on its Web site said. It would step up the policy of cutting fixed costs, notably by controlling total salary costs.

“Investments already made at the international level will be exploited to the full. Investments for vehicle projects have been put on hold at Chennai and postponed at Tangiers (Morocco). Total investments in 2009 will be at least 20 per cent lower than in 2008,” the release said.

Renault today said its 2008 revenues were €37.7 billion, 7 per cent down over the year, and net income €599 million. The company reported a second-half loss of €982 million in 2008 against a profit of €1.5 billion in the first half of the year.

Source : Business Line (Online Edition) (2/12/2009)