Renault warns of difficult year after posting record loss

The French car maker warns that a global shortage in auto chips could cut its car production by 100,000 vehicles this year

Renault reported a net loss of $9.7 billion for 2020. EPA

Renault braced investors for another challenging year as lingering coronavirus restrictions and supply chain challenges threaten the French car maker coming off a record annual loss.

The manufacturer reported a net loss of €8 billion ($9.7bn) for 2020, worse than the €7.85bn deficit forecast by analysts. Much of the damage was done during the first half, when lockdowns crippled auto shipments.

“2021 is set to be difficult given the unknowns regarding the health crisis as well as electronic components supply shortages,” the company’s chief executive Luca de Meo said in a statement.

“The priority is profitability and cash generation,” he added.

Still, Renault said business improved significantly during the final six months of last year, when it generated an operating margin of 3.5 per cent and positive automotive operational free cash flow.

Mr De Meo took over in July after his predecessor was ousted as part of the fallout from the arrest of former leader Carlos Ghosn. He is now pushing through plans aimed at shoring up profits, repairing the troubled partnership with Nissan and cutting costs by closing sites and eliminating 14,600 jobs.

Renault fell as much as 8.5 per cent in early Paris trading on Friday. The shares are still up around 8 per cent this year.

Renault’s result was weighed down mainly by Nissan, which accounted for nearly €5bn of that amount, most of it accumulated during the first half. The car-making alliance, which also includes Mitsubishi, has been shaken to the core and now rests on the companies turning their fortunes around.

The company faces the difficult task of rationalising a bloated cost structure and excess production capacity.

Last month, Mr De Meo unveiled a turnaround plan targeting an operating margin of more than 3 per cent by 2023 and at least 5 per cent by mid-decade. Analysts have said the push lacks ambition considering the 4.8 per cent return in 2019, before the pandemic hit.

Renault has already achieved 60 per cent of the planned €2bn in cost-cutting, it said on Friday.

While the company didn’t give an outlook for 2021, it warned that a global bottleneck in auto chips could cut its car production by 100,000 vehicles this year, with the shortage reaching its peak in the second quarter.