Renault Buoyed By Gains Outside Europe

PARIS – Despite lost share in Europe, Renault had better cash flow and worldwide sales than it predicted a year ago, putting Renault-Nissan Alliance CEO Carlos Ghosn in a good mood as he presents the results for 2011.

The Renault Group revenues climbed 9.4% to E42.6 billion ($55.8 billion), while unit sales were up 3.6% to 2.7 million, thanks to significant increases in Russia, Turkey and Brazil. With France and Germany, those are Renault’s top five markets.

Ghosn expects worldwide sales will grow 4% this year, with a decline of 3%-4% in Europe and 7%-8% in France. A day earlier, PSA Peugeot Citroen CEO Philippe Varin forecast a 7% drop in Europe and a 10% decline in France.

Without offering specifics, Ghosn anticipates improved cash flow and sales in 2012. For 2013, he predicts 3 million deliveries, which would be an 11% gain from last year.

Renault has stopped folding its joint-venture partner, AvtoVAZ, sales into its own, but negotiations to add the Russian auto maker to the Renault-Nissan Alliance “are near conclusion,” Ghosn says, adding he expects Nissan to take a 25% stake in AvtoVAZ, the same as Renault’s, within weeks.

Later this year, he says, AvtoVAZ will manufacture the first Lada model to be based on the Renault Dacia M0 platform.

Renault-brand sales in Russia rose 60.4% in a market that grew by 40% overall. The auto maker also gained share with its rising sales in Brazil (up 21.2%) and Turkey (up 23.4%).

The only dull spot at Renault is its South Korean subsidiary, Renault Samsung, where domestic sales tumbled 29.9%. Renault blames competitors and lack of competitive products. CFO Dominick Thormann adds that exchange rates between the Korean won and Japanese yen hurt on the cost side, because Renault Samsung imports many powertrain components from Japan.

Currency fluctuations worked against Renault by E201 million ($262.4 million) during the year, but the biggest extra expense was a E509 million ($664.4 million) increase in raw-materials costs.

Renault says Monozukuri, the borrowed Japanese name for the auto maker’s internal cost-saving programs, saved E500 million ($652.5 million), just enough to balance the big materials-increase loss. Monozukuri will add to next year’s positive cash flow, Ghosn says.

PSA’s Varin said earlier this week that his car company’s overcapacity in Europe was about 20% on a 2-shift basis. Ghosn addresses the issue with a lecture: “What is your baseline? Some factories make 600 cars a day, some make 400, some make 500.”

Ghosn goes on to say that the Alliance’s best factories are in Mexico, producing 600 cars a day, and that no auto maker wants to run its plants on a 2-shift, 5-day basis. He estimates overcapacity on a 2-shift, 5-day basis in Europe is about 20%.

Renault executives say the Sandouville plant in France is operating at about 70% capacity on that basis, and that the auto maker’s French, Spanish and Slovakian plants are running at an average 80%-85%.

The Alliance this month opened a factory in Tangiers, Morocco, which prompted commentary in the French press about sending jobs offshore. Ghosn says the new facility makes no cars now built in France but instead is producing vehicles on the M0 platform that underpins the Logan, Sandero, Duster and other Dacia/Renault entry-level vehicles.

Ghosn says the European debt crisis has not affected Renault push’s to mass-market electric vehicles. This year Renault will introduce its Zoe purpose-built EV, as well as the Twizy scooter. They join electric versions of the Fluence sedan and Kangoo van launched last year.

The decision to delay battery-plant projects in Portugal and France is based on improved batteries being offered by other suppliers, including LG Chem in Korea, which will provide the Twizy battery.

“Our object is to sell electric vehicles,” Ghosn says. When the auto maker started its EV project, only its in-house supplier was able to provide the right features and acceptable cost, but other battery makers have entered the market since then.

“We will continue to adapt our strategy,” he says, with the object of producing EVs with the best cost, range and durability.