RENAULT SUSPENDS ITS ACTIVITY IN MOSCOW, REFLECTS ON ITS FUTURE IN AVTOVAZ
by Gilles Guillaume and Tassilo Hummel
PARIS (Reuters) – Renault, the most exposed automaker to Russia, announced on Wednesday evening that it was suspending production at its Moscow plant with immediate effect and considering the future of its controlling stake in the leading Russian automaker, Avtovaz.
The diamond group, the subject of growing criticism in the face of the recent resumption of its activities on Russian soil, has also announced that it is revising its financial objectives for 2022 downwards accordingly, with an operating margin of the group now expected to be around 3%, against at least 4% previously, and a free cash flow from the automobile industry expected only “positive”, and no longer at least one billion euros.
Although it had never officially communicated before Wednesday evening on its prospects in Russia since the Russian offensive in Ukraine, Renault was carefully monitoring criticism of the resumption of production at its Moscow plant this week and that of the factories in ‘Avtovaz the previous week, two sources familiar with the matter told Reuters.
The pressure escalated on Wednesday, when Ukrainian President Volodimir Zelensky called on French companies to leave Russia and stop being “war sponsors”, citing Auchan, Leroy-Merlin and Renault.
Ukrainian Foreign Minister Dmitro Kouleba immediately called for a global boycott of the French car manufacturer.
“Renault Group recalls that it is already implementing the necessary measures to comply with international sanctions,” said the manufacturer in a press release published after a board meeting devoted to the Russian file.
“The group is evaluating possible options regarding its stake in Avtovaz, while acting responsibly towards its 45,000 employees in Russia,” he added.
Renault makes 8% of its operating profit in Russia, according to Citibank, mainly through its 69% stake in the JV owning Avtovaz, the owner of the Lada brand.
He specified that a non-cash adjustment charge would be recorded at the time of the first half results, corresponding to the value of the group’s consolidated intangible, tangible and goodwill assets in Russia (2.195 billion euros as of December 31). .
A TURNOVER IN TWO WEEKS
Renault’s board had already considered different scenarios for Russia two weeks earlier, two other sources familiar with the matter told Reuters.
But fearing, like the management, that a definitive exit from Russia would weaken Renault’s recovery, the directors had then validated the maintenance of the group’s presence as it is, in accordance with the sanctions and with the support of the principal shareholder of the constructor, the French State.
Avtovaz accounted for half of Renault’s automotive division’s current operating profit last year.
After resuming production on March 16, Avtovaz announced a further partial production halt at its Togliatti and Izhevsk sites this week due to shortages of electronic components.
The Renault factory in Moscow, disrupted by logistical problems linked to the war in Ukraine, had just resumed production on Monday.
Although Russia weighed in at nearly 20% of the group’s total volumes in 2021, Renault Chairman Jean-Dominique Senard told Reuters in early March that the crisis would not jeopardize the automaker’s rebound plan.
“Renault remains focused on implementing its Renaulution strategic plan,” the automaker said in its statement.
(Gilles Guillaume report, edited by Jean Terzian)