Business Essentials for Professionals


Renault Warns Of A Difficult 2021 As It Reports A Record $9.7 Billion Loss For 2020

Renault Warns Of A Difficult 2021 As It Reports A Record $9.7 Billion Loss For 2020
After a loss of 8 billion euro last year, the French auto giant Renault also raised the warning flag for 2021 because of a shortage of electronic chips which added on to the uncertain recovery from the Covid-19 induced global recession, said the company’s Chief Executive Luca de Meo.
While pushing ahead with cost cuts, Renault is also trying to find out ways of boost profitability and sales under the leadership of De Meo, who was appointed to the post in July. The company also noted preliminary signs of improving momentum with slight improvement in its profit margins during the second half of last year. The company did not provide any financial guidance for the current year even though Renault said that its 2 billion euro cost-cutting target could be reached by it prior to the time frame set by it – [potentially even in December of this year.
While saying that the company was focused on its recovery, Renault also cautioned of flattening of orders in early 2021 because of resurgence of the pandemic and related restrictions in some countries.
With the European Union making its emission regulations stricter and after the creation of the fourth largest automaker of the world with the merging of rivals PSA and Fiat Chrysler to create Stellantis, there are a lot of challenges ahead for Renault.
All global automakers suffered severely through 2020 but companies such as Volkswagen and Daimler were able to weather the storm by a surge in demand and car sales towards the end of the year in China.
"The beginning of the year has shown some signs of weakness," De Meo told analysts. De Meo also hoped for a "positive surprise" in the second half of the current year by which time there would have been some easing of the chip shortage issue. “2021 should be another difficult year, but we have taken the necessary measures to anticipate and overcome challenges," he said.
For the current year, production of as much as about 100,000 vehicles could be affected by the component problems, Renault estimated.
In 2019, the company had also reported a loss of 141 million euros. And in 2020, the faltering production and output and closure of dealerships across the world because of the lockdowns to prevent the spread of the pandemic had also hit the company very hard.
A loss of 7.4 billion euro for 2020 was expected by analysts polled by Refinitiv as the majority of the hut was already recorded by the company in the first half of the last year.
For the entire of 2020, a negative free cash flow was reported by the group which was partly because of its banking unit RCI being unable to pay a dividend because of the European Central Bank guidelines to cope with the Covid-19 crisis, Renault said.
The company is confident of a change in the situation in the current year and free cash flow should turn positive again, said the company’s deputy CEO Clotilde Delbos.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc