AUTOMOTIVE - RENAULT
Renault to cut jobs in bid to raise profitability
Thursday 24 July 2008
French automotive group Renault will cut overheads and aim for voluntary job cuts "to preserve competitiveness and profitability". Company shares fell in mid-day trading Thursday even as it posted a first-half net profit of 1.467 billion euros.
Thursday 24 July 2008
By AFP (story) / Oliver Farry (video)Shares in French auto group Renault fell in mid-day trading on Thursday after a sharp rise in response to strong trading figures and a hard drive to raise profitability.
The group said it would cut overheads by 10 percent, and the CGT trade union forecast that it would shed 6,000 jobs in Europe.
In initial trading, Renault shares jumped 6.85 percent, but later showed a net fall of 1.97 percent to 56.70 euros. The overall CAC 40 index was down 0.58 percent.
The group published an estimated net profit for the first six months of 1.467 billion euros (2.3 billion dollars) but this did not include the impact of results from Nissan in which Renault is the main shareholder.
This figure was a big increase from the equivalent non-Nissan net profit for the same period of last year of 1.07 billion euros.
The company reported a 2.3-percent rise in sales in the first six months of the year to 20.94 billion euros and a sharp increase in operating margins, a ratio of operating profit to sales, to 865 million euros or 4.1 percent from 2.8 percent.
But Renault warned that the economic climate had deteriorated by far more than it had imagined when it drew up a business plan called Renault Contract 2009, and so it was now applying an action plan "to preserve competitiveness and profitability."
This would involve a 10-percent cut in overheads, mainly through a programme for voluntary job cuts which would be concentrated in Europe.
Renault would also raise the sales prices of its vehicles, as already announced, to match a rise in raw material costs. Non-essential projects would be frozen or delayed, and recruitment in Europe would also be frozen.
Analysts at brokers Raymond James had expected a lesser margin of 840 million eurosm, noted that the group stood by margin forecasts of 4.5 percent this year and 6.0 percent in 2009, and that it would increase its prices.
But a stock trader, who declined to be named, told AFP that the shares had switched direction as the company briefed analysts and the press.
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ANALYSIS
"Ghosn is trying to see the glass as half-empty" Business editor D. Herbert 23/07 4pm (GMT+2)
