Renault warns on 2008 sales as auto woes widen

PARIS - France's Renault joined the ranks of European automakers bracing for a slower-than-expected 2008 on Wednesday as it warned its sales growth goal of 10 percent could be cut in half.
 
The launches of its Laguna executive model and Koleos sports utility vehicle have proven ill-timed as slowing economies and record high oil prices slow sales across Europe.
 
Renault's warning comes after rival PSA/Peugeot-Citroen this week said western European markets would shrink by 4 percent this year and Italy's Fiat said it would temporarily close factories.
 
"The economic situation has changed dramatically since the end of the year. We now see sales up 5 to 10 percent with a bigger chance of 5 percent," Renault Executive Vice President Sales and Marketing Patrick Blain told reporters.
 
That is in line with PSA's target of 5 percent growth for 2008.
 
Renault CEO Carlos Ghosn said the remarks on sales were a sign of prudence, not of doubt about the company's products or strategy.
 
"Realistically we are dealing in an environment which is very uncertain and we have to be very transparent in the fact that it can get better or worse," Ghosn told reporters in Lisbon where he announced an agreement with Portugal on boosting the use of electric cars.
 
Ghosn said: "We don't know if the headwinds are going to strengthen or weaken, go up or down, if the oil is going up or down, I know steel is going up, I don't know if the financial crisis is going to get better."
 
Ghosn will make a statement on 2009 targets on July 24 alongside first-half results, Blain said.
 
Renault said it increased sales by 4.3 percent to 1,325,504 vehicles in the first half of 2008, including Renault, Renault Samsung, Dacia and some Lada models.
 
That topped French rival PSA, Europe's No 2 carmaker after Volkswagen, which reported a 0.5 percent rise in the first half.
 
But its slower-than-expected pace puts at risk Renault's 2009 target of an extra 800,000 cars versus 2005, Blain said.
 
Its global market share in the first half rose by 0.2 percent points to 3.8 percent.
 
It increased car prices by some 1.5 percent in recent months but this was not enough to offset the rise in the cost of steel and other raw materials and more price increases will be needed, Blain said.
 
Exane BNP analyst Thierry Huon said he expected Renault to announce cost cutting steps including lower production and lay-offs with its first-half results.
 
Many sector analysts are already discounting chances of Renault hitting its 2008 and 2009 operating profit margin targets of 4.5 and 6.0 percent.
 
"We don't think that anybody would put the blame on a "captain" who would capitulate on what would have become impossible ¡®commitments.' It would be, in our view, exactly the contrary," said Landesbanki Kepler analyst Pierre-Yves Quemener.
 
Blain said the automaker had "not much luck" in launching the Laguna executive model just as slowing economies prompted companies to hold back on renewing fleets and in the launch of the Koleos SUV into a market struggling with record fuel prices.
 
"I would rather arrive late in the race than not at all," Blain said, adding he remained confident in the two models as well as in the relaunch of the best-selling Megane model due later this year.
 
Renault said the impact of seven new model launches so far this year would intensify in the second half with sales growth strongest outside of Europe.
 
In the first half, Renault brand sales were up 4 percent worldwide and those of Dacia, maker of the Logan and Sandero, rose 13.3 percent. Sales at South Korea's Renault Samsung fell 7.2 percent.
 
Group sales in Europe fell 0.5 percent.
 
Lada sales of 271,919 vehicles in the second quarter reflected Renault's purchase of a 25 percent stake in AvtoVAZ to establish a foothold in the rapidly growing Russian market.
 
Renault shares have fallen roughly 45 percent since the start of 2008, underperforming a 30 percent fall in the European automotive sector.
From: Automotive News Europe

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