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Renault Sells Volvo Stake, Completes Russian Deal

Renault Sells Volvo Stake, Completes Russian Deal
Lada Deal Promises Big Leverage In Massive Local Market

Renault pleased investors by selling its remaining shares in Volvo trucks for €1.6 billion, and finalizing control over Lada-manufacturer AvtoVAZ of Russia.

According to the Financial Times of London’s Lex column, Renault’s Volvo deal was smart, with the remaining 6.5 per cent stake being sold to capitalise on a 30 per cent rise in Volvo shares in six months.

“It shores up Renault’s finances at a time when competition in Europe is brutal,” said Lex.  

“Thanks to the profitable Dacia business, it should be close to breakeven in Europe this year,” Lex said.

Lex isn’t worried by cannibalisation reports.

“A good flow of product launches is also scheduled for coming quarters. Less encouraging is Renault’s politically driven desire to avoid plant closures as it tries to cut labour costs,” Lex said.

Renault also completed its control over Lada in a deal valued at close to €570 million. Renault-Nissan will have a 67.1 per cent stake in a joint venture with Russia’s Rostekhnologii, which will hold 74.5 per cent of OAO AvtoVAZ.

Citi Research said Russia is currently the second biggest car market in Europe with 2.9 million sales in 2012. This should rise to 3.4 million by 2015, when it could be as large as Germany. Deutsche Bank calculates that by 2015/2016, the venture could be manufacturing 1.6 million vehicles in Russia, which it reckoned, given possible sales in Russia, might leave between 300,000 and 500,000 vehicles to be exported back to Europe.

If Renault can source West European needs in Russia, that might assuage Lex’s worry about it being hampered by politically driven avoidance of plant closures in France.

Neil Winton – December 20, 2012

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