It has taken a month, but the Renault Group has finally shuttered – for now – operations in Russia, partly due to political pressure, partly because sanctions have bitten and the requisite parts to finish cars have become harder to source.
It remains to be seen how Russian president Vladimir Putin will respond. He has threatened to nationalise any Western business that refuses to continue operations in what is now regarded as a pariah state.
It is hard to judge the Renault Group’s exposure to the fallout from the invasion of Ukraine. Russia has been important for it in recent years, contributing about a fifth of its global output and 10% of its revenue.
Most notably, the Avtovaz subsidiary (which includes Lada) was just two months ago estimated to have £2.6bn in assets. Now it’s effectively worthless as its operation – and the rouble – collapses.
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The potential loss of Lada is particularly galling for the Renault Group. Back in 2012, it was encouraged by Putin to take a controlling stake in the ailing company, and it has spent the past decade trying to modernise it, taking huge flak as it cut its workforce – large enough at the Togliatti plant to have its own on-site hospital – from 100,000 to 40,000.
The rewards were once worth the hassle. Lada may have been largely confined to Russia by tougher global emissions rules, but it has continued to dominate its home market (which peaked at 2.98 million in 2008 and has since settled at 1.5 million to 1.8 million), with a share of around 20%.
In recent months, reports suggested it hoped to ‘do a Dacia’ and globally launch a new Niva into the affordable SUV market.
Walking away from good news is hard for anyone, but for a firm that’s rebuilding in the wake of exceptionally hard times, reluctance to shut off a potential profit centre is understandable.
For weeks, boss Luca de Meo prevaricated, walking the tightrope, helped by the French government’s seemingly laissez-faire attitude towards interests in Russia (perhaps partly guided by its ownership of stakes in many of them, the Renault Group included).
In the face of the reality of war crimes, though, the argument that the firm wasn’t prepared to skewer ordinary Russians whose livelihoods depend on it could no longer hold.
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"....reluctance to shut off a potential profit centre is understandable."
Is it?
Loads of other companies, large and small, in all sorts of sectors of the economy, have made this type of decision immediately. Compromising your profitability is nothing compared to what the Ukranian people are going through.
I went to Tolyatti a couple of years ago, sweet Jesus, if that had already been modernised then I cant imagine what it was like before. Even stayed at the Lada resort on the banks of the Volga. All I will say is that it was aligned with the general brand values...