Carlos Ghosn: Running Out of Gas?

Carlos Ghosn: Running Out of Gas?

Is Renault-Nissan's Carlos Ghosn running out of gas?

That’s the question the Financial Times ponders in its Tuesday edition. The article focuses on the falling price of Renault's stock as evidence.

Renault's stock price suffered its worse day in five years last Friday with a 7.5 percent drop; the week's loss totaled 12 percent. And on Monday, Renault's stock price slipped further.

“What must be particularly galling for Carlos Ghosn, Renault’s charismatic and impetuous golden boy, is that the share fall coincided with what he probably considered was pretty good news,” the paper writes

Indeed, last week, Renault reported a return to annual sales growth in 2007, after a 4 percent decline in 2006. Total car sales for the Renault group rose 2.2 percent in 2007 to 2.49 million units. Within those totals, much of the growth came from the low-cost Logan; it was "a meager" 2 percent rise for the group and a “measly” 1 percent rise for the Renault brand," notes the Financial Times. Still, it was an increase, and Renault has confirmed a surge in deliveries in the past two months thanks to the launch of new models.

The Financial Times notes that investors are more concerned with the performance and prospects of Nissan, 44 percent owned by Renault. “Brilliantly restructured by Mr. Ghosn from 1999,” Nissan reported weak U.S. sales in December 2007, though it bucked the industry trend for the year, reporting sales 4.5 percent ahead of 2006 and enjoyed the highest percentage sales increase of the Big 6 in the States, according to Edmunds.com's analysis. Still, the automaker, like many others selling in the U.S., is bracing for an even more difficult year in the U.S. in 2008.

The Financial Times suggests the concern of investors is Nissan-Renault's heavy dependence on Nissan and specifically Nissan in the U.S.

As the Financial Times story goes:

“Since the turnround orchestrated by Mr. Ghosn, Nissan has contributed about two-thirds of Renault’s profits. Heavily exposed to the slowing U.S. economy and the weak U.S. dollar, analysts are already warning that its contribution to Renault profits could fall by about 10 percent this year.

“In a perfect world, Renault’s own model revival and expanding low-cost car ventures in emerging economies –- the highly successful budget Logan sold under its Romanian Dacia brand and a recent move to expand in Russia –- should help compensate Nissan’s difficulties in the U.S. market. Yet, for all its success in developing regions where sales grew by 16.5 percent, Renault needs to halt its slide in Europe, where sales fell by 4.1 percent. Europe still accounts for 65 percent of the group’s total sales.

"When Mr. Ghosn took charge of Renault three years ago, he launched what he called the “Renault Commitment 2009,” pledging to increase group sales by 800,000 vehicles a year to reach 3.3 million by 2009, thanks to 26 new or redesigned models. To honor this commitment, Renault, which sold 2.5 million cars last year, will have to increase its sales by 30 percent over the next two years. This implies that sales will have to continue growing by about 5 percent in Europe and 25 percent in the rest of the world. Not impossible, but given the current state of many of the world’s leading economies, it could prove something of a tall order.

"Mr. Ghosn likes to set goals and hold people, including himself, accountable. When he was put in charge of Nissan in 1999, he swore that in three years he would bring the Japanese carmaker back into the black or resign. He won his bet one year ahead of schedule. With Renault, achieving his ambitious targets on time could prove even more challenging. Of course, he could always pull a rabbit out of his hat by reviving his so far unsuccessful efforts to combine with a U.S. car manufacturer. In the current circumstances, one might now be more willing to consider a trilateral alliance with the Franco-Japanese group."

The Financial Times points out Renault's stock is not alone in its tumble; indeed, car sales (and auto stocks) are among the first casualties of any economic slowdown.

The paper notes Fiat suffered its single biggest stock drop since September 2001 with its shares tumbling last Friday by about 7 percent; a 12 percent drop for the entire week. France’s Peugeot-Citroën lost about 7 percent. Porsche plunged 9 percent, as did German-based tire and parts group Continental while French tiremaker Michelin fell 6 percent.

On this side of the Atlantic, Ford stock fell last week to a 22-year low.

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.