After Much Posing, Renault Concedes Little; Investors Sanguine
Insistence On Strategic Committee Involvement Might Mean Trouble
French President Nicolas Sarkozy’s decision to flex his muscles with Renault had newspaper editorialists snorting with anger, but investors seemed to shrug their shoulders and concentrate on their forecasts, which seemed to agree that the company’s future was more attractive than most.
In an editorial headed “Renault, C’Est Moi”, the Wall Street Journal was not only outraged by Sarkozy’s intervention, but also miffed by the European Union’s spinelessness.
Reminding its readers that France still owns 15 per cent of Renault, the Wall Street Journal said the company’s attempt to move Clio production to Turkey gave Sarkozy a chance to play patriot games.
“We are not giving all that money to support the auto sector so that all our factories can leave,” the Journal quoted Sarkozy as saying, referring to the €3 billion loan Renault, and Peugeot, received in 2009. It also quoted Industry Minister Christian Estrosi’s remarks – “When a French car is destined for the French market, it has to be made in France,” Estrosi said.
“This nonchalant subversion of the European Union’s free market principles and state-aid rules has so far triggered only a muted response form the European Commission,” fumed the Journal.
The Financial Times Lex column was getting hot under the collar too.
“It looks like classic French political theatre. But President Nicolas Sarkozy’s Renault-bashing after it toyed with basing production of a future Clio outside France leaves a bitter taste,” Lex said.
IHS Global Insight thought the French government’s decision to exert more power over Renault by insisting on taking its seat on the strategic committee, had the advantage of keeping future tiffs private, but worried that this might crimp Renault’s attempts to cut costs.
Bank of America Merrill Lynch wasn’t too bothered by this hot air, saying that Renault’s European sales in 2010 should drop less than the market average by virtue of its impressive new model flow. In another report, also published after handbags were flourished, Merrill Lynch said Renault auto profits will rise to two per cent in 2010, up from 2009’s one per cent.
Other analysts expect Renault to report a net loss of €2.8 billion euros in 2009, make a small profit of about €100 million in 2010, and return to meatier profits of some €1.1 billion in 2010.
The Financial Times’ Lex pointed out that in fact Renault only promised to devote part of Clio production at the Flins factory, which would also make electric cars, so not much damage was done to Renault’s business plan.
Cut social charges
Lex had some cooler advice for President Sarkozy.
“Mr Sarkozy would do better focussing on reducing social charges – which Renault warns make French production costs of a Clio-type car 10 per cent higher than in eastern Europe – if he really wants to save jobs,” Lex said.
Neil Winton – January 30, 2010