Renault pushes to keep Dacia plant in Romania competitive

Dacia 1300 cars are seen during a vintage car show in Bucharest, Romania (file). Faced with rising wage demands and hobbled by Romania’s feeble infrastructure, Dacia’s Mioveni plant in central Romania risks being overtaken by Renault’s newer Dacia factory in the northern Moroccan city of Tangiers.

Romania plant risks losing ground to Morocco; Renault to increase automation at Romania plant to 20%; business to Iran to normalise within 12-18 months ReutersBucharestRenault will increase automation, keep wage increases moderate and shed jobs gradually at its Romanian Dacia plant to keep the subsidiary competitive, its country head told Reuters yesterday.Renault acquired Dacia — a ubiquitous car for decades under Romanian Communism — in 1999. The no-frills brand has since developed into a top seller for the French company as well as being one of the eastern European country’s main growth drivers. But faced with rising wage demands and hobbled by Romania’s feeble infrastructure, Dacia’s Mioveni plant in central Romania risks being overtaken by Renault’s newer Dacia factory in the northern Moroccan city of Tangiers. The Moroccan plant has stepped up production of the same “entry line” of budget models since it was opened in 2012. To increase efficiency, Renault plans to automate 20% of the Romanian Mioveni plant within five years, from a mere 5% now, managing director Nicolas Maure said. Maure also said he saw renewed potential in Iran and said Renault could quickly ramp up sales there if Western powers and Iran conclude a deal on the country’s disputed nuclear programme. The automation level compares to about 70-90% for western European, Japanese or American carmakers, he added. Automation could rise further, but the company would move slowly to avoid a “tsunami” of job cuts. While Romanian wages remain some of the lowest in the European Union, Mioveni workers earn above the economy’s average and around 2.5 times more than staff in Morocco. “We have to be realistic, so if we want the plant to remain competitive we should slow down the pace of salary increases for a period of time,” Maure said. About 14,000 people work at the Mioveni plant, out of a total Renault workforce of 17,000 in Romania. The factory accounted for around 40% of Renault’s regional production from plants in Romania, Turkey and Russia last year. It was still ahead of Morocco in terms of competitiveness, Maure said. Mioveni’s production could be slightly higher in 2015 than the 340,000 vehicles manufactured last year, just shy of the plant’s capacity of 350,000. “Nevertheless, in 2015 the volumes in Tangiers are increasing a lot,” he said. “So the positive gap we have may reduce sharply in 2015. This is why it’s important to drive the competitiveness of the plant.” Better infrastructure would benefit the company and the Romanian economy, Maure said. Renault has waited for years for the government to build a motorway from near the Mioveni plant to the Hungarian border and to Western markets beyond. Its workers have also staged protests, urging the government to act. It takes delivery trucks 10 hours to drive the roughly 500km (310 miles) northwest to the Hungarian border. That slow progress adds €30 ($33) to the cost of each car, Maure said. However, he rejected the prospect — the subject of much speculation in local media — of Renault closing the plant if the highway was not completed by 2020. Renault posted better than expected sales in the first three months of the year, buoyed by a recovery in Europe’s auto-market. Mid-market brands such as its own name cars posted strong gains while the sales of Dacia models slowed after rising strongly during the financial crisis. “... the Mioveni plant is fully used this year but at the same time because of the customer demand, which is much higher in Western Europe than what we forecast a year earlier, the Tangiers production will continue to increase,” he said. The Romanian plant has traditionally shipped car parts like body panels and transmissions for local assembly to Iran. “So as soon as the conditions are met to ship large volumes to Iran we would love to start again shipping those parts and components,” he said. “We believe that this will come within a reasonable future. Within 12 to 18 months we should be back to normal.”