French carmaker Renault scrapped its once sacrosanct 2009 profit targets, dropped its dividend and slashed output, as it warned that the economic crisis would change the landscape of the global auto industry.
The group posted a 78 per cent drop in 2008 net profit and a 7 per cent decline in sales today due to what it described as a "financial and economic crisis of massive proportions" and said it expected the market to get worse this year.
It scrapped its dividend payment for 2008 but chief executive Carlos Ghosn told a news conference it would return to paying a dividend as soon as possible. Ghosn also said Renault had cut production by 45 percent in the fourth quarter.
Disappointing results from France's largest carmaker PSA Peugeot Citroen on Wednesday "helped set the table with low expectations for Renault, which it met," said Morgan Stanley analysts in a research note.
"Renault's second half results provide no reason to buy the stock today, but in this market, we would not be surprised to see some relief."
Renault shares traded 5.9 per cent higher at 10.48am, as the market welcomed the drastic cut in output. Despite today's rally, Renault stock is still down 7.5 per cent so far in 2009, falling behind the DJ Stoxx auto index, which is down 2.9 per cent year-to-date.
New chief operating officer Patrick Pelata said the company was ready 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 ($323 million) in additional cost savings through its alliance with 44-per cent owned Nissan.
Mr Ghosn, who is chief executive of both Renault and Nissan and chairs the ACEA European auto industry body that has asked for more state support for the sector, said the crisis was "deep" and "would change the landscape of the industry".
Reuters