Paris - French carmaker Renault dropped its once sacrosanct 2009 profit targets on Thursday in the face of an unprecedented crisis in the auto industry that it said would change the landscape of the sector.
The group posted a sharp decline in 2008 net profit and sales on Thursday due to what it said was a "financial and economic crisis of massive proportions" and expects the market to get worse. It scrapped its dividend payment for 2008.
New chief operating officer Patrick Pelata said the company was fully mobilised to face the crisis and was focused on generating a positive free cash flow. He told journalists the firm was considering selling real estate and rationalising factories in the Paris region and was seeking 250 million euros in additional cost savings through its alliance with 44% owned Nissan Motor Co Ltd of Japan.
Carlos Ghosn, who is chief executive of both Renault and Nissan and chairs the ACEA European auto industry body that asked for more state support for the sector, said the crisis was deep and would change the landscape of the industry.
Echoing comments by Fiat chief executive Sergio Marchionne, whose company is in link-up talks with Chrysler, Ghosn said there would be fewer car companies around after the crisis.
Renault said in a statement its volume and operating margin targets for 2009 were now "unachievable" and it would focus on cutting inventories by a further 800 million-1 billion euros in 2009.
France's second-largest carmaker is, along with competitors, battling a global car sales crisis as the credit crunch and deteriorating economic outlook slashes consumer spending.
Net profit fell to 599 million euros from 2.734 billion in 2007. Earnings before interest and tax fell to 212 million, missing the average forecast of 794.43 million euros in a Reuters Estimates poll of analysts.
It beat a target of cutting stocks of unsold vehicles to year-end 2007 levels by December 2008, ending the year with 5.3 billion euros of inventories, it said, after cutting production twice as fast as sales fell in the fourth quarter.
Net debt at the group's automobile division stood at 7.944 billion euros at year-end, representing 40.9% of shareholders' equity, compared with 9.5% a year earlier, the company said.
Group sales for the full year 2008 fell 7% on a like-for-like basis to 37.791 billion euros, compared with a Reuters Estimates poll figure of 38.858 billion euros, based on 24 analysts' forecasts.
Tighter ties with Nissan
The group said it would step up its policy of cutting fixed costs in 2009 and would seek to "strengthen operational synergies" with alliance partner Nissan Motor Co, by converging the engine range and working together on electric vehicles.
Nissan warned on Monday it would make its first annual loss since Ghosn took the reins a decade ago.
On Monday French President Nicolas Sarkozy announced a 3 billion euro loan for each of France's two car manufacturers in return for a controversial pledge to safeguard French jobs.