Ghosn to guide Renault in tough times for autos


By Louise Knowles

PARIS, April 28 (Reuters) - Carlos Ghosn, who takes over as Renault chief executive on Friday, will inherit a car maker in rude health, a far cry from the near-bankrupt Nissan he joined in 1999 and nursed back to profitability.

But despite record profits in 2004 and a model line-up whose quirky design has blown competitors out of the water in recent years, Renault is not immune to tough market conditions which are battering the sector.

Renault has performed better than most of its European rivals in recent years, but it faces problems posed by the ageing of its key models -- the Megane and the Scenic -- and it posted an unexpected drop in sales in the first quarter, with particularly worrying declines in markets, such as Turkey, which were engines of growth in 2004.

Ghosn is expected to spend his first months back at Renault re-acquainting himself with the company he left in 1999, before giving the first indications of his strategic vision for the future in the summer.

"He will likely wait until the half-year announcement to refine his goals for the rest of the year. After that, it is very possible he will set out a three-year strategic plan, like he did at Nissan," Wargny analyst Sebastien Caron said.

He is not expected to make any short-term changes to Renault's target for an operating margin above 4 percent in 2005, after hitting 5.1 percent in 2004.

"We believe Carlos Ghosn ... will be cautious about setting new near- or medium-term financial targets for Renault, given the declining trajectory of the company's key profit generators -- Scenic and Megane," Goldman Sachs analysts said in a note ahead of Friday's annual general meeting.


While renewing his relationship with Renault, Ghosn will also retain his position as head of Japan's Nissan, in which Renault has a 44 percent stake, a situation that could lead to closer links between the two car makers, analysts said.

"For the last five years Renault and Nissan have brought together their processes and their purchasing. They have coordinated their product range plans and their geographical coverage. Now it is time to gather the fruits. Carlos Ghosn should make sure that all the processes in place generate synergies," Lehman Brothers' Jeremie Papin said.

In the medium term, one issue expected to attract Ghosn's attention is its offering in the larger cars segment, where it has struggled to make an impact in recent years.

"One of the main things will be devising a profitability improvement plan for large cars, something which has already been underway," said Commerzbank's Adam Collins, adding that Renault and Nissan could share a platform for a larger model.

So far only the city car Modus, Renault's latest new model, is built on a shared platform.

Sales in the rest of the world are also likely to be an area of focus, as Renault seeks to carve out a stronghold in emerging markets as a buffer against continuing demand drought in Europe.

But there is concern that Ghosn may be spreading his time too thinly and that he risks neglecting some part of his fiefdom as he juggles roles which straddle three continents.

"It remains a key area of concern, particularly so if the changes felt by Nissan increase and if conditions in North America get more difficult -- that could be seen as a distracting influence," Commerzbank's Collins said.

Having sold a record 3.388 million cars worldwide in 2004, Nissan warned on Monday that 2005 would be a tougher year, and said it saw a rise of just one percent in earnings. It also said it would delay by one year a previous target to sell 4.2 million vehicles by the end of a three-year business plan.

Ghosn officially takes over from Louis Schweitzer at Renault's annual general meeting on Friday afternoon. Schweitzer will stay at Renault as chairman.



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