The Renault Connection

José Dedeurwaerder serves as president and chief executive officer of a American Motors Corporation. He joined the company in '81, after having worked with Renault for 25 years. Before crossing the Atlantic, he headed the successful launch of the Renault 9, which became the Alliance here. Additionally, he has headed Renault operations in Mexico, Argentina, and Belgium. Dedeurwaerder has charted a vigorous course for AMC, and is executing it boldly.

On March 31, 1978, American Motors and Renault set forth the the guidelines of a proposed affiliation. But few Americans perceived the importance, for although German and Italian auto makers' names are common American parlance, few American readers recognized Renault as then being the European sales leader.

But that is background. the proof of the pudding, as it were, came in a vehicle dubbed the Alliance.

Engineered from the Renault 9 platform and introduced in September of 1982, the Alliance bore the Renault nameplate. Motor Trend editors voted it their '83 "Car of the Year," and public excitement went beyond AMC's expectations, topping 125,000 in first-year sales.

But the work that led to Alliance's success is a longer story, bound inextricably with Renault history. In 1898, Louis Renault hand-built his first auto and founded the company that bears his name. Growth was quick and steady: volume was 180 cars in 1900, 10,200 in 1913, and 65,000 by 1939. After WWH, the company was nationalized, and recovery was strong, bolstered by the famous 4CV. In 1960, Renault Group passed the half million sales milestone, and before the end of the decade, it passed one million; by 1976, 1.5 million; by 1981, two million.

Today, with 100 French facilities and 24 overseas locations, Renault Group ranks as the leading French industrialist. Diversification includes cars, trucks, farm equipment, industrial engines, bicycles, tires, plastics, and robotics, plus credit, leasing, and rental. And Renault cars sales have led the European market through the early years of the current decade, outstripping Ford, Fiat-Lancia, Volkswagen-Audi, Peugeot-Citroen-Talbot, and GM's Opel-Vauxhall.

The importance of the above is simple. AMC now draws on the strengths of a European giant. With front-wheel-drive, for example, AMC's engineering expertise is comparable to GM's -which explains the engineering brilliance of the '83 Alliance and the '84 Encore, tailored from the R-9 and R-11 platforms.

In 1984, the company also introduced the new Jeep Cherokee and Wagoneer, which made a clean sweep of press awards, while establishing a new benchmark in the sport-utility segment. In '84, total Renault/Jeep sales topped 350,000. But that is only half the story.

In the words of chief executive officer Jose Dedeurwaerder (pronounced Jo-say Ded-dur-wahr-dare), the Alliance, Encore, and Cherokee and Wagoneer were Phase One. Phase Two involves something the company has not attempted in the past. In the remainder of the eighties, AMC will spread out into the different market segments, offering a compact pickup, a mid-size sedan, and a sports car.

Chairman Paul Tippett once characterized American Motors as "the odd-ball" car company, but his honesty underscores how the company has changed. For the fleet buyer, this new is of much more than passing interest. When structuring the company fleet, the fleet manger is the ultimate car professional, concerned with operating costs and resale. And for the fleet manger, AMC is indeed the one to watch.

AF: We have heard speak of your company's five-year plan. Would you please elaborate?

JD: We've just completed the second year of our five-year strategic plan. It began in '82 with the introduction of the Renault Alliance. Alliance was a tremendous success. Not only was it named Motor Trend's "Car-of-the-Year," but it quickly exceeded our original sales expectations. More than 100,000 Alliances were sold in its first eight months on the market.

A year later, in the fall of '83, we introduced the new Jeep Cherokee and Wagoneer sport wagons. These vehicles also became overwhelming sales successes as soon as they hit the market. The three leading off-road magazines-4 wheel & off-road, Four Wheeler, and off-Road -each named the Jeep Cherokee the "4´4 of the Year." No other vehicle had ever captured all three awards. Our early sales forecast of 40,000 Cherokees and Wagoneers was shattered with 75,000 sales that first model year.

We also introduced the hatchback Renault Encore as a companion vehicle for Alliance in the subcompact segment. Sales of Alliance/Encore totaled 170,000 in '84.

AF: What's in store during Phase Two of your plan?

JD: Our objective over the next three years is to broaden our coverage in the passenger-car market. Today we compete in only about 37 percent of the total car market. Between now and '87, we'll expand from the small subcompact market, where Alliance and Encore compete, to other segments as well the compact, and the intermediate segment with our Brampton car. That will increase our representation to more than 50 percent of the total car market. We'll also be adding entries in the truck market, with the Jeep Comanche pickup in both two-wheel-drive and four wheel-drive versions this fall. And we'll be bringing out imports such as the Renault Alpine sports car, plus other new Jeep vehicles.

AF: How has all that strategy been working out in dollars and cents?

JD: Our financial turnaround during the first two years of our five year plan has also been dramatic. After fourteen consecutive quarterly losses, we had five straight profitable quarters. Our five-year program is on track, financially. In '84, although our profits were modes, we improved our financial performance by more than a quarter of a billion dollars on continuing operations. A mammoth turnaround for a $4 billion company like AMC.

AF: By '88, you will have a broad range of new products in the show-rooms. What are your ballpark figures for sales projections for' 88?

JD: Our passenger car business in '88 could approach a level of 350,000 vehicles.

AF: Would you sketch in your capital expenditures for the '82 to '87 period?

JD: We have said that the period of '85 to '87, projected capital expenditures will be about $1.1 billion. Most of this will go for product development. We estimate capital expenditures for '85 to be about $300 million. Capital expenditures for '82 to '84 were about $812 million.

AF: We know about Renault's specific contributions such as the R-9 platform and engines. But speaking in more general terms, would you elaborate on what Renault offers to AMC?

JD: Renault offers us a wealth of expertise in the design and manufacture of automotive products. Renault is a very large, international automotive company. Renault and American Motors together are the sixth largest auto manufacturer in the world. All of Renault's technical resources are available to us. Renault's expertise in may engineering areas-aero-dynamics, safety, ergonomics, and robotics-is world renowned. The many advances that they are making in these and other areas are being share with us.

In our long-range product programs, we're able to evaluate all the new product platforms that Renault will be developing. We'll have the option of importing their products, as we'll do with the Renault Alpine sports car, of taking the platform and producing our own vehicle, as we did with their R-9 that became our Renault Alliance. The Renault/American Motors partnership is ideal from a technological point of view.

AF: What are you projecting as Comanche's sales volumes during its first two years? And what are its major advantages in this highly competitive segment?

JD: We're projecting a substantial number of sales for the Jeep Comanche. As for the product advantages, there are many.

The Jeep Comanche pickup will be built in both two-wheel-drive and "on demand" two-wheel-drive/four-wheel -drive systems. Comanche will offer three powerplants -the 2.5 liter, four-cylinder and 2.8 liter, six -cylinder gasoline engines, plus our 2.1 liter turbo diesel. Its uni-frame construction and quadra-link solid front-axle suspension are exclusives. Comanche will have the highest ground clearance, longest wheelbase, largest cab package, and widest front seat of any compact truck, We'll have two different four wheel-drive systems. In short, we'll meet and, in most cases, beat the competition in the key product features buyers want.

AF: What volumes are you projecting for the '86 Alpine? How extensive will its Americanization be?

JD: The Alpine is not expected or intended to be a high volume car for us. But it will be quite an attention getter. The Alpine is a superb rear-engine sports car that will draw much interest from not only the public but our dealer body as well.

Most of the changes we'll be making to the Alpine will be modifications required for U.S. safety and emission standards. Once you see the Alpine, you'll see why we've decided not to alter it much from the European version.

AF: To my thinking, the Brampton car is the most important vehicle the company will ever produce. How do you plan on making it a hit in terms of styling, engineering, and reliability?

JD: it's too early to talk publicly about specific details of the car we'll be manufacturing at Brampton, but I assure you this product will be unique and will have many attributes that will set it aside from the competition. If you look at our track record with new products, it's clear that ours are not "me too" in nature. The world was not waiting for another small economy car when we introduced the Renault Alliance. The car was successful due to its styling, ride, and product features. And it was attractively priced to be an outstanding value to the consumer. When we introduced the Jeep Cherokee and Wagoneer, Ford and General Motors already had successful compact sports-utility vehicles on the market. We may have been last to arrive, but we certainly came "best dressed" for the party. We had a host of major product advantages that enabled us to quickly capturer a major share of this market. The Brampton car will be a unique vehicle that will stand out from the competition in similar ways to those I've just mentioned.

AF: Speaking of the Brampton car, how would you define the segment it is targeted at in terms of age, income, taste, and status? Who will the Brampton buyer be?

JD: The typical intermediate buyer today is fairly mature, averaging 54 years in age. Sixty-five percent of these buyers are male and have college degrees or attended college, and 85 percent are married. The average household income for this group is about $35,000.

But we are not targeting our car to this traditional buyer. Instead, we want to reach maturing baby boomers, buyers who tend to give equal consideration to both imported and domestic products. Our target demographics are younger buyers, say 45 years old on the average. We also expect a higher percentage of female buyers, which reflects the trend of working women among the baby boomers. Our buyers will be better educated and slightly more affluent than the traditional intermediate buyer we know today.

AF: From a management perspective, what are the advantages of working inside a small company? And how do those advantages translate into better products?

JD: Well, American Motors is not really a small company, considering our sales last year wer3e approximately $4 billion. Sure, by ourselves, we're a lot smaller than Ford, General Motors, and Chrysler. But with Renault, we have the technical resources of one of the world's largest auto manufacturers.

Our management structure is much smaller than those of the Big Three, and there are definite advantages. We don't have redundant layers of management. We're organized into a highly efficient structure and are thus able to make decisions quickly.

AF: What does that mean for the consumer?

JD: It means we pride ourselves in being able to develop highly competitive vehicles that offer outstanding value to the consumer.