Crisis At Renault: The Vilvoorde Plant Closing

Task: Write a memo to Renault's board outlining your assessment of Schweitzer's actions and his suitability in this important international position. Do you feel he should have behaved differently? Be sure to recommend a way forward.

Main Issue: As other automotive manufacturers, Renault was facing an overproduction problem, combined with a breakdown of national markets. After their plan of early retirement of some of their employees was rejected by the French government, Renault's chairman, Louis Schweitzer, announced completely unexpectedly that it would reduce employees by closing the Vilvoorde plant.Consequently, 3,100 Renault workers and an estimated 3,000 employees in direct supply companies would loose their jobs in five months. From the legal perspective, the decision ignored all legal rules and procedures concerning factory closures, such as OECD procedures, national codes of conduct, and European Union and national legislation on collective redundancies and works council rights. According to these regulations , employees have the right to be notified before a decision about a factory closure is made and informed about the ways in which the company plans to deal with the consequences for the employees.

Louis Schweitzer's actions provoked a real crisis, which is questioning his efficiency as a global manager of this multinational company.

Discussion of Alternatives and Recommendations

Taking into account the negative impact of Schweitzer's actions on the company image and employees morale, the following alternatives could be pursued to solve this crisis:

1. Keep him on long-term and improve his reputation through a better communication with the Vilvoord employees;

2. Keep him only on short-term, put the Renault's management team and its work council in charge of dealing with negotiation with the Vilvoord employees;

3. Fire and replace him with another chairman appointed by the board of directors.

General disapproval of his decision is based mainly on the inappropriately way in which Schweitzer made public the news on the closure of the Vilvoord plant:

* Announced the plant closure by a brief statement, next day after the early retirement plan was rejected by the French government;

* As presented in his statement, the only reason of his decision was that the company expected to report a significant loss for 1996 (its first loss in 10 years);

* Didn't let the employees know about his decision in advance, they learned of the news from TV or radio.

A

deep analysis of his skills as a global manager proves that Schweitzer acted unethically as he announced completely unexpectedly the Renault's decision to reduce the number of employees by closing the Vilvoorde plant. Therefore he demonstrated his failure to embrace consistent the ethical standards regarding the employees (related to exhibiting character dimension), considered as an important category of skateholders in any multinational company. The relationship between the company and its employees represents an important aspect of a good corporate governance.

On the other hand, before and during the crisis of Vilvoorde plant closure, Schweitzer demonstrated most of the competencies of