Daily Management Review

First Annual Loss In A Decade Reported By Renault, To Make Major Cost Cuts


First Annual Loss In A Decade Reported By Renault, To Make Major Cost Cuts
Its first annual loss in a decade was reported for 2019 by the French auto giant Renault. This forced the company to also cut down its forecast for 2020. The company is currently rebuild its image after the Carlos Ghosn scandal and further strengthen its relations with Japan’s Nissan in its three-company alliance including another Japanese auto maker Mitsubishi.
The company announced Friday that it had incurred an annual loss of 141 million euros or $153 million compared to profit that it had reported for 2018. There was also a 30 per cent drop in operating profits to touch 2.11 billion euros.
"It has been a tough year for Groupe Renault and the alliance," said acting CEO Clotilde Delbos at a conference call. The company had been hit "right when we were facing internal difficulties" by a the broader global autos downturn, Delbos added.  
This loss has prompted Renault to also announce a target of reducing structural costs by 2 billion euros or $2.2 billion in the next three years and it has pledged to follow the cuts strictly. In this regards, the company also did not rule out possible cut in jobs as the company will be reviewing the performance of in all of its production units.
Starting July, Renault is to have a new CEO in the form of the former Volkswagen Group executive Luca de Meo. The main task for the new CEO would include staging a turnaround of the company as well as strengthening ties with Nissan.
The Nissan alliance was on track, assured Renault executives on Friday. While acknowledging that investors were still skeptical, Delbos said that both the companies would announce fresh targets together by May this year.
Delbos said, there is no time for Renault to wait until de Meo take charge of the company in July.
Following the ouster of Thierry Bollore, a long-standing Ghosn ally, from the post of CEO in October last year, the company had named Delbos as the interim CEO of the company. Delbos is set to continue her role as the finance head of the company after the joining of de Meo.
After doing away with restructuring costs, Renault will be able to report a positive cash flow, a metric that is being closely watched by analysts, in 2020, Delbos said. "We are very confident that there is no topic on cash availability within the group," Delbos said.
The contribution of Nissan to the income of Renault dropped to 242 million euros in 2019 compared to 1.51 billion euros in 2019. 43 per cent of Nissan is owned by Renault. Nissan itself reported its first annual loss in almost a decade as the Japanese company also cut down its profit forecast for 2020.
The sale of Renault last year has suffered in a number of countries such as in Argentina. The company said that its business operations in China needed to be adjusted. Renault operates in China under a joint venture with local Chinese auto maker Dongfeng for passenger cars vehicles and with partners with Brilliance China Automotive Holdings for manufacturing light commercial vehicles.