Renault scraps Ghosn's €11m 'golden parachute' as profits plunge

French car maker hit by plummeting diesel sales and falling demand in Europe abandons pact that would have paid former chief two years salary

(FILES) In this file photo taken on November 8, 2018 Chairman and CEO of Renault-Nissan-Mitsubishi Carlos Ghosn looks on during a visit of the French President at the Renault factory, in Maubeuge, northern France. Two lawyers defending former Nissan chief Carlos Ghosn on charges of financial misconduct submitted their resignations on February 13, 2019, their law firm said in a statement. - 
 / AFP / Ludovic MARIN
Powered by automated translation

Renault's revenue and profits plunged in 2018, hit by collapsing diesel sales, exchange-rate setbacks and a withdrawal from the Iranian market, the French car maker said.

Revenue fell 2.3 per cent to €57.42 billion (Dh237.32bn), while recurring operating profit dropped 6.3 per cent to €3.61bn, with a 6.3 per cent operating margin.

The car maker said it was targeting operating margin of around 6 per cent this year, a tamer goal than its previous pledge to exceed that benchmark in 2018. Analysts had expected recurring operating profit of €3.52bn on revenue of €58.1bn, based on the median of 12 estimates from an Infront Data poll for Reuters. Net income came in at €3.3bn, down

Renault, which is battling with the aftermath of the arrest of its former chief Carlos Ghosn in November, has come through a tough few months with falling sales in Europe and emerging markets to still meet forecasts for last year. Earlier this week, car manufacturing alliance partner Nissan’s quarterly earnings missed expectations and the Japanese manufacturer slashed its profit forecast for the year.

The French company said it plans to scrap a golden parachute of about €11 million for Mr Ghosn, avoiding a politically explosive payout for the car veteran who named a new team of defence lawyers in Tokyo.

Mr Ghosn will not benefit from a non-compete agreement that would have paid him two years’ compensation, the car maker said on Wednesday. Renault also plans to withhold stock-based pay awarded from 2015 to 2018 that was conditional on his staying at the company.

Mr Ghosn’s non-compete agreement would have been worth upwards of €5m, while 100,000 performance-related shares granted in 2015 that would have vested this week to have a market value of about €5.7m. He would also have been entitled to millions of euros worth of additional shares, had he remained at the company.

Handing the imprisoned former executive a huge pay check would have been embarrassing for the French state, which holds 15 per cent of Renault. President Emmanuel Macron has been under attack for months from protesters complaining that the government favours the rich and is not doing enough to improve the lives of ordinary people.

The board said it will decide next month on Mr Ghosn’s remuneration for 2018.

Renault, which sold half its vehicles in Europe last year, on Thursday spelled out the potential knock-on effect of a hard Brexit across the region, saying it will only meet its forecasts if the UK can work out a deal to leave the European Union.

The car maker’s prediction for a stable market in Europe this year hinges on an orderly Brexit, it said, and only then would it be able to boost revenue as expected.

The warning brings into focus the dire consequences for car makers across Europe of a hard Brexit, told Bloomberg. To date, the concerns have centred on the future of UK operations of manufacturers such as Jaguar Land Rover, and British consumers holding back spending on big ticket items hurting Ford and Volkswagen. A no-deal exit would jeopardise 100,000 jobs in Germany, according to a study by German economic institute Halle IWH.

Renault’s “results demonstrate the group’s resilience and its rapid adaptation to a more challenging environment”, said chief executive Thierry Bollore.

A tougher business environment is adding pressure on Renault and Nissan to ease tensions in their two-decade old alliance forged by Mr Ghosn. On top of the looming Brexit, record investments in electric cars and a slowing Chinese market have weighed on industry growth. Renault’s new chairman Jean-Dominique Senard is flying to Japan this week with a brief to mend relations as Nissan seeks to gain more control in the partnership.

At Nissan’s earnings this week, chief executive Hiroto Saikawa said the alliance may need to revisit targets for 2022, a set of goals given in 2017 that call for synergies and increased annual vehicle sales.

Alleged misdeeds by the once jet-setting Mr Ghosn, who also used to chair Nissan and third alliance partner Mitsubishi Motors, are also under investigation in France.