Carmaker Renault announced that it would scrap its dividend, halt development of three models and further cut its payroll to face what CEO Carlos Ghosn said was a crisis "of massive proportions" that will transform the industry.
PARIS — Carmaker Renault announced today that it would scrap its dividend, halt development of three models and further cut its payroll to face what CEO Carlos Ghosn said was a crisis “of massive proportions” that will transform the industry.
France’s second-largest carmaker reported a 982 million euro ($1.27 billion net loss in the second half of 2008, compared with a profit of 1.42 billion euro in the same period of 2007. Ghosn said he expected the outlook to darken further as the economic and financial crisis ravages car sales.
Renault scrapped its dividend and said it is cutting staff bonuses down to director level.
The automaker is also reducing inventories, cutting costs, selling real estate and looking to squeeze an extra 250 million euro in cost savings from its alliance with Nissan — which this week announced an aggressive restructuring plan of its own including 20,000 layoffs.
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“The important thing is to survive the crisis, which will be terrible in 2009 and tough in 2010,” said Carlos Da Silva, an analyst at Global Insight, a financial forecasting firm.
“These are very, very short-term actions designed to ensure they have money to keep the factories going and keep spending on research.”
Renault, which is getting a 3 billion euro rescue loan from the French government, is bound by an agreement with President Nicolas Sarkozy not to make forced redundancies in France this year.
Still, Ghosn said the payroll will fall by 9,000 to 120,000 this year through 6,000 voluntary job cuts announced in September and an additional 3,000 jobs which will left unfilled when people leave on their own.
He also wants to extend to white-collar staff what in France are called “partial unemployment” arrangements — where blue-collar workers are paid a percentage of their salary partly subsidized by the government during temporary production stoppages.
“A financial and economic crisis of massive proportions hit the global economy in 2008,” he said. “It risks being long and without doubt will change the industrial landscape.”
Chief operating officer Patrick Pelata said he spent his vacation reading books on the Great Depression to prepare Renault for a bleak future. The carmaker needs not only to weather the crisis, but to prepare for a very different future, he said, noting that companies which had failed to adapt went under even when the global economy began to pick up in the mid-1930s.
As Renault seeks to understand what cars fuel- and cost-conscious consumers will be demanding in future, the automaker halted the development of three models which would have been launched in 2012 and beyond, he said. Products launches this year and next will continue as planned.
Renault said its alliance with Japan’s Nissan is a “key advantage” in a sector heading for a new wave of consolidation.