Rogue May Be Light at End of Tunnel for Korea’s Samsung Motors

Does the launch of the Nissan Rogue CUV at Renault Samsung Motors’ Busan, South Korea, plant spell the end of the production drought for the automaker and at long last provide a solid step up the stairway to success?

Analysts won't speculate, but even the most cautious now must see hints.

With production of the Rogue added to the mix, there’s the chance an additional 70,000-80,000 vehicles will roll out of the Busan operations annually. Current monthly production schedules for the Rogue are set at 6,000 units, sources say.

The compact CUV is being exported to the U.S. where demand has outstripped capacity for the model at Nissan’s Smyrna, TN, plant.

The added volume of the exported Rogue, plus strong demand for RSM’s newly launched diesel-powered version of its SM5 flagship midsize sedan and market success of the SM7 Nova big sedan, pushed September global sales up 47.1% year-on-year to 16,484 vehicles. The Rogue accounted for 4,143 units, or 25%, of the total.

For the first nine months RSM global sales reached 102,152 vehicles, up 12.5% from like-2013. Domestic sales rose 29.6% to 53,712 units, while exports declined 1.9% to 48,440, despite the boost provided by the Rogue.

The SM7 Nova, which also had its launch in September, was targeted for sales of 200 units per month. It sold more than 500 in the first two weeks. Demand for the SM5 D, which hit the market in July, continues to outstrip supply. There is a current backlog of more than 1,000 orders.

For October, demand is strong enough that the automaker is adding one hour of overtime each week and scheduling weekend and holiday shifts – the first time since an overtime freeze went into effect last November. This increased the October production level 5,000 units, to roughly 22,000 vehicles.

September sales traditionally are high, and uniquely so this year because of the early success of the new-vehicle launches and addition of the Rogue. But if current production levels continue unabated, the Busan plant would be pushed near to its capacity of 300,000 vehicles, the first time it has come close to that mark since pilot production began in 1997.

Officials from parent Renault say launch of the Rogue in Korea is significant. Although it was done to boost production to badly needed profitable levels, Busan won the work only after an analysis that included other options. RSM sources say that means the Korean plant is rated at least as good as other Renault Nissan Alliance facilities around the world.

In some ways, the Rogue is a production experiment that could see RSM snag other models for export to the Renault Nissan Alliance, in addition to RSM’s own Korean-developed product line.

Part of the recent wage settlement with Samsung’s workers union was a guarantee by Renault that RSM would have a stronger product-development role within the Alliance. RSM was the developer of the current QM5 Neo compact CUV launched in January and will have full development responsibility for the vehicle’s next generation.

RSM also will be given opportunities to develop new models for Renault, according to Gilles Normand, head of Renault’s Asia-Pacific operations.

Designed and built for Samsung by Nissan, the Busan factory was the most advanced assembly plant in Korea, if not the world, when it turned out its first SM5 model in 1997. It began regular serial production in 1998 – at the height of the Asian financial crisis, when everything came tumbling down on the overextended conglomerates operating in Korea.

When it was realized demand was critically low for the upstart Samsung Motors, with little hope of ever recouping the reported $2 billion plant investment, the company went on the auction block. It was scooped up by Renault in 2000 at a fire-sale price of about $350 million.

Often overlooked by analysts, who are fixated on sales and production figures, is the high customer-satisfaction rating RSM has maintained over the years.

In a survey of 100,000 Korean customers by rating firm Marketing Insight in July, RSM placed first in sales service, product satisfaction and after-sales service.

Surveys by the same agency put RSM No.1 among all automakers in the sales-service category in each of the past 14 years.

This shows in domestic sales, which are escalating far ahead of national trends. But without the Rogue in the mix, the picture would have remained dire, instead of hopeful and encouraging.

As it is, RSM is on track with where its planners have said it would be.