Renault Spying Case Involves Electric Vehicles

French carmaker Renault has suspended three senior managers over allegations they leaked secrets about the development of electric vehicles.  One of the suspended employees in the corporate espionage scandal is believed to be a member of Renault’s management committee, while the others headed electric vehicle projects. The employees are now being given the chance to respond to the accusations, before any further action is taken.

Renault plans to launch electric versions of its Fluence model, priced at about €25,000, and its Kangoo Express van in 2011. The company is spending €200m a year on electric vehicles alongside Nissan, which is manufacturing its Leaf model. According to a new report by KPMG, over 90pc of automotive executives believe investment in hybrid, battery, and hydrogen fuel-cell technologies will be the key priority over the next five years.

The company said it could not identify the employees while an investigation was under way. But a person with knowledge of the situation, who was not authorized to speak publicly, confirmed that one employee involved was Michel Balthazard, senior vice president for advanced engineering and a member of the management committee, which is run by Carlos Ghosn, the chief executive.

The company declined to make Mr. Balthazard available. Mr. Balthazard, who has also been widely identified in the news media, could not be reached for comment via his work e-mail or through a phone directory search in the Paris region.

While details remain unclear, the situation calls to mind one of the industry’s most prominent spying case, that of José Ignacio López de Arriortúa, a former General Motors executive who was charged a decade ago by a Detroit grand jury with stealing secrets from G.M. and passing them to his new employers at Volkswagen. Mr. López avoided trial after a Spanish court refused to allow his extradition.

Neither Renault nor the office of Mr. Besson, the industry minister, would say whether the executives were caught actually passing information or whether an industrial rival or foreign country was suspected. But one country likely to receive scrutiny is China.

The United States-China Economic and Security Review Commission, which is appointed by Congress, said in a report in 2009 that Beijing had been “a major beneficiary of technology acquired through industrial espionage.” China has denied in the past that its intelligence agencies were engaged in stealing commercial secrets.

There have been other industrial espionage cases in France in recent years. In 2007, a Chinese woman was convicted of stealing confidential computer data from the research and development division of Valeo, a major French car parts maker, while on a student internship.

Renault is the second-largest automaker in France, after PSA Peugeot Citroën. Renault and its Japanese partner, Nissan Motor, are betting heavily on electric car technology for growth. The technology is made more attractive by the tax incentives many countries offer for purchases of electric vehicles.

“We’re in a period of change, and players in developing countries are trying to catch up,” said Philippe Houchois, head of European auto industry research in London for UBS. “Demand for technology transfer may be greater now than it’s been for many years, and Renault and Nissan are probably the most advanced in getting electric vehicles to large-scale production.”

“The whole industry is concerned about protecting its secrets,” Mr. Houchois added, “but it’s getting increasingly difficult to do so.” Mr. Houchois said that Renault had experienced worker morale problems for years, including a rash of suicides, and that poor morale could have been a contributing factor in “the propensity to leak.”

With Nissan, Renault is investing 4 billion euros, or $5.3 billion, in the electric car sector. Renault owns more than 43 percent of Nissan, and Nissan owns more than 14 percent of Renault. The French government is the largest shareholder in Renault, with slightly more than 15 percent. Nissan declined to comment. In 2009, Paris lent Renault and Peugeot 3 billion euros each over five years. Part of that money has been repaid.

Batteries could be an area of interest to Renault’s rivals. In the race for electric car supremacy, the company that develops the best battery could put itself in the lead for a generation, guaranteeing its own supply, while also selling profitably to rivals, in much the same way that some Japanese automakers have an early lead in hybrid technology.

Nissan and NEC, the Japanese electronics company, have a venture to make electric car batteries. Analysts said Renault had been quite reliant on that technology until now, but it was also pushing hard on its own second- and third-generation battery technology.

It currently has more than 200 patents, confirmed or pending, on electric vehicle and battery technology. It plans to make its own batteries at plants in Britain, Portugal and France. Renault had 1,400 engineers and technicians working on electric vehicles at its Guyancourt campus near Paris at the end of 2010, and it expects that number to rise to 1,700 by the end of this year. Renault will introduce three electric cars in Europe this year: a sedan, built in Turkey; a light commercial vehicle, made in France; and a city car, made in Spain. Next year, it plans to offer a compact, called the Zoé, based on its Clio.

Christian Husson, Renault’s head of legal and ethical affairs, said an investigation lasting several months had "enabled us to identify a body of converging evidence demonstrating that three group employees have committed misconduct that infringes Renault’s ethics and deliberately endangering the company’s assets."

Renault and its Japanese partner Nissan have staked their future on electric vehicles and plan to launch several models by 2014 to meet the rapidly rising demand for more environmentally-friendly methods of transport. They forecast that electric cars will make up 10 percent of the market by 2020 and are pumping 200 million euros a year in their electric programmes, while other major carmakers are also investing heavily in the sector.

"The expression ‘economic war’, while sometimes outrageous, for once is appropriate," said Industry Minister Eric Besson. "It (the Renault case) appears to concern the electric car, but I do not want to go further." Renault, which has suspended three managers for leaking company secrets, was also giving little away about what happened but said on Thursday that its "strategic, intellectual and technological assets" had been targeted.

A months-long probe had established a body of evidence which shows that the actions of these three colleagues were contrary to the ethics of Renault and knowingly and deliberately placed at risk the company’s assets. Renault, in which the French state has a 15-percent share, has not said who the alleged spying might benefit.

Sources said those suspended had all headed electric vehicles projects and one was a member of the company’s management committee, a 30-strong panel of top managers headed by chief executive Carlos Ghosn. The suspensions are the latest in a series of industrial espionage shocks to hit France’s strategically important auto sector, which employs 10 percent of the entire French workforce.

Tyre manufacturer Michelin and auto parts maker Valeo have also been targets of spying. Industry Minister Besson said he wanted firms which receive state aid for research and development to boost efforts to protect themselves against espionage.

Secretary of State for Foreign Trade Pierre Lellouche, meanwhile, called for a law to protect companies’ industrial secrets as a matter of urgency. The car industry, aerospace, defence and pharmaceutics are the sectors most affected by espionage, experts say.

"When you need 10 years to bring out a vehicle, 12 years to get a pharmaceutical molecule to the market, 20 years for a plane … the temptation to plunder is obviously strong," said Bernard Carayon, a French member of parliament and economic intelligence expert. The German bank NordLB’s auto analyst Frank Schwope said that companies today "can’t really keep secrets, there are so many people involved and so many documents.

"Today you have email, you have the Internet, you have mobile cameras and it’s much easier to steal information than before," he said, adding however that "you can always get secrets but the question is, is it good information." Electric car technology is a particularly prized asset at Renault.

It plans to launch electric versions of its Fluence model and its Kangoo Express in mid-2011, and its smaller Twizy and Zoe models in late 2011 and 2012. Nissan has already launched an all-electric car for the mass market, the Leaf, in Japan and the United States, where it sold out on pre-orders. The Leaf is set to be launched in select European markets in early 2011. Other top car makers across the world are also in on the act and their electric vehicles will be on display at this month’s Detroit Motor Show.