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Renault Maintains 2008 Targets, Ghosn Says No More Large Strategic Projects Until 201030 Apr 08Speaking at Renault's AGM yesterday, CEO Carlos Ghosn reiterated that Renault will stick by its profit and sales volume growth targets for the year despite increasingly unfavourable operating conditions.
Renault Can Still Achieve Growth… At Renault's Annual General Meeting (AGM) yesterday, CEO Carlos Ghosn reiterated that the French carmaker is sticking by its previously announced targets for 2008 despite increasing difficult operating conditions. This means a 4.5% operating margin target and a 10% rise in vehicle sales, in an environment of unfavourable currency movements and rapidly rising raw material prices. Ghosn describes the situation as mediocre: "As long as we have not shown solid results for several months and demonstrated we can reach our operating margin target, we will remain in a zone of mediocrity." The executive also warned of difficult months ahead: "The first months of the year have not been easy. Everything suggests that the next few months will not be either, given an economic and financial environment that is both unfavorable and volatile." Ghosn spoke of how raw material prices are increasing at a faster rate than expected and how European demand is contracting, especially in key markets such as Spain and Italy. He also pointed to the fact that Renault, like other European-based carmakers, is seeing its profits eroded by the rise of the euro, which makes its cars more expensive on global markets. On the upside, Ghosn said that so far, the fall-out from the sub-prime loans crisis in the United States on emerging market economies has been less than feared. … From Emerging Markets As was the case in 2007, when Renault's sales outside Europe increased by 16.5% compared to the previous year, thereby offsetting lower European volumes, "the growth of the automobile market will come via emerging countries" in 2008, Ghosn said. He described Renault's activities in mature markets as "defensive". However, Renault has no new strategic expansion plans in these markets to announce, Ghosn said. He said that for now, Renault has had its fill with projects launched in markets such as Russia, India, Morocco and Iran that will incur costs in 2008 and 2009, but that will not produce results until 2010 or 2011. "You shouldn't expect any new projects through 2009; there won't be any," he said. Earlier on in the day, he had reiterated that this includes China. "Even if we had a really good project, I'm not sure we could go through with it. You can't go into China in a halfhearted way; you have to put all your other projects aside," he remarked. Outlook and Implications Ghosn made no revelations at Renault's AGM; the difficult environment in which it and its rivals are currently operating in has been well documented, and Renault had already said on the release of its first-quarter revenues earlier this month that its full-year 2008 targets remained in place. It is clear that little growth will come from Western Europe in 2008 despite the arrival of several new Renault products during the year, most notable of which will be the Koleos sports-utility vehicle (SUV). Instead the biggest increase in volumes will come from countries like Brazil, Russia and India, where Renault's low-cost Dacia brand is expected to enjoy particular success. Indeed, Dacia could well be Renault's saviour as its expanding model range and remarkable growth rates are a continued high point and have not peaked yet. |
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