For weeks, Renault was hesitant to participate in a mass outflow of businesses from Russia, but on Wednesday it collapsed.
By Craig Trudell Bloomberg
Published March 24, 202224 March 2022
Fifteen years ago, Vladimir Putin had a problem. AvtoVaz, the maker of a popular car brand in the communist era, was a joke (how to double the value of Lada? Fill the tank). State-owned enterprises struggled to cope with competition with adventurous foreign carmakers in Russia after the collapse of the Soviet Union.
Despite the AvtoVAZ trouble, when the Kremlin put up its shares in AvtoVAZ in 2007, Western manufacturers were lined up. Renault beats General Motors and Fiat, Putin respects the company’s Russian identity, as superstar executive Carlos Ghosn proudly managed members of France and Japan’s largest car alliance. I bet that it would be.
Landing Lada turned out to be a Pyrrhic victory. Renault announced on Wednesday that it would amortize the value of Russia’s € 2.2 billion ($ 2.4 billion) worth of assets. This is about one-third of the market capitalization. We also value options for more than two-thirds of AvtoVAZ’s stock. This is a business with a whopping 45,000 employees.
For weeks, Renault was hesitant to participate in the mass outflow of companies from Russia. Closing factories and blocking trade will cost automakers much more than their rivals. Last year, Renault sold more than 480,000 vehicles domestically, more than doubling shipments in any other country after France.
With no good choice, Renault sought to maintain some similarities to the status quo. A few days after Russia invaded Ukraine, the company temporarily shut down its assembly plant near Moscow due to supply and logistics problems. AvtoVAZ succumbed to the same stock, but both set dates when they planned to resume operations.
The blow was terrible when Renault reopened its Moscow facility this week. Parliamentarians demanded a boycott of Britain, followed immediately by the Ukrainian Foreign Minister. Within hours, the company suspended operations at its Moscow factory and built a cave.
Renault was in an unstable situation before the Russian invasion. The sudden expulsion of Ghosn from Nissan in late 2018 left the two companies’ alliance unstable until it almost completely collapsed.
CEO Luca de Meo’s plans to turn Renault around have called on automakers to make still marginal profits over the next few years. Fitch Ratings warns that this slight recovery may fail. The company’s market capitalization is currently below the value of Nissan’s stock.
Demeo does not publicly talk about why Renault’s management thought about whether to stay or go. If the decades of reversal of foreign investment in Russia is permanent, it could lift AvtoVaz — Lada was leading a market share of almost 80%. But for the time being, sanctions have destroyed the economy and assets have proven to be too toxic.
Carlos Tavares, CEO of Stellantis, the counterpart of Renault’s biggest rival De Meo, is one of an increasingly few Western bosses trying to justify keeping the assembly line up and running. .. He said withdrawing from Russia earlier this month would hurt workers, not Putin.
“I don’t think we need to announce whether we will withdraw,” Tavares told reporters. “The important thing is that we take care of people.”
Given how quickly the pressure campaign on Renault reached out, the Stellantis van plant near Moscow may not run that long.