Renault's operating margin plummets to just £191m for 2008
12 February 2009

Renault has been hit by what it calls “a rapid and brutal downturn” which took its operating margin from 1.35bn Euros (£1.21bn) in 2007 to just 212m Euros (£191m) in 2008.

Speaking this morning in Paris, Renault President and CEO Carlos Ghosn blamed a “financial and economic crisis of massive proportions that hit the global market in 2008”.

The company says that the controversial 3bn Euro (£2.69bn) loan from the French government was essential to keeping the company running and that Renault would also look to borrow another 400m Euros (£360m) from the European Investment bank.

Renault revealed a breakdown of its market performance in 2008; it showed an extraordinary collapse in the fourth quarter, after what had been a strong start to the year.

The severity of the downturn is reflected in the company’s profit margins, which dropped from between 2.5 and 3 per cent in October 2008 to just 0.6 per cent in December 2008.

Read about how Renault could virtually pull out of the large car market

In the first quarter of 2008, Renault saw registrations up by 6.5 per cent and revenue up by 4.2 per cent. The figures were still positive in the second quarter but by the third quarter, registrations were down by 3.5 per cent and revenue 2.2 per cent.

However, the final quarter of the year saw registrations down 21.8 per cent and revenues down 30 per cent. As a consequence, Renault had to slash new car production by 45 per cent.

Although Renault’s 2008 global sales were only down 4.1 per cent compared with the previous year and European sales down 7.2 per cent, there are fears that 2009 will see sales figures plummet by as much as 40 per cent.

Last month Renault built just 120,000 vehicles worldwide, down from 220,000 in January 2008.

Although Renault’s 2009 production plans show that it expects December 2009 to see much better sales than the same month in 2008, Carlos Ghosn said that he could not yet call the bottom of the sales collapse.

“We expect to hit the bottom [of the sales decline] in 2009, but when we get there, will we spend a longer period at the bottom of the market? Will the recovery be V- or U-shaped?” he said.

Ghosn rejected criticism of the bail-out plan, which also sees Peugeot-Citroen getting a loan. “All countries will help their auto industries,” he said. “It is not realistic to think that a government will not take an interest [in saving jobs].”

Read Hilton Holloway's blog on the current situation at Renault

Hilton Holloway

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