Renault sells its Russian assets: what does this mean?


Renault sells its Russian assets: what does this mean?
Written by aquitodovale

Renault ready to leave Russia: the French house keeps one foot on the ground in Moscow but is freeing itself, for now, of its local activities. The news is important: as the Russian Ministry of Industry and Commerce announced in a press release, between Moscow and the Boulogne-Billancourt car manufacturer “agreements have been signed for the transfer of the Russian activities of the Renault group to Federation of Russia and the government of Moscow “.

Russia took over the 100 percent of the local Renault subsidiary and Nami, the Central Research and Development Institute of Automobiles and Motors (run by the Russian state), acquired 67.69% of Avtovaz from Boulogne-Billancourt.

From 2016 Renault had the majority of Avtovaz controlling the conglomerate Lada Auto Holding, which managed the production of the heir of the historic Soviet-era car, in a consortium that saw a strategic minority stake of 32.3% in the hands of Rostec conglomerate of the defense and national mechanics led by the Putinian boyar Sergej Chemezov and well-known business partner of other Western players such as Pirelli.

Renault, Dacia and other groups linked to the Boulogne-Billancourt house contributed 30% of Russian car registrations, the work of 45,000 employees and 8% of the group’s profits from operations in the country. For a group that in 2021 had laboriously returned to grind profits, with 900 million euros of profits on about 45 billion euros of turnover, the renunciation of the Russian market is much more important than that of any other manufacturer.

Let us not forget that 15% of Renault’s shares are in the hands of the French state, which therefore by deciding to get rid of this stake in Russia signals an acceleration in the economic gap with the Russian Federation. The operational difficulties had led Luca De Meo, Renault’s Italian, to suspend production of the Lada at the end of February due to a lack of materials and uncertainty in the supply of the factories; later, Renault resumed operating together with other large transalpine groups (such as Leroy Merlin and Auchan) but after the sinking of Volodymyr Zelensky against his presence in the country he had stopped activities. At the balance sheet level, Renault confirmed a “non-cash” write-down of almost € 2.2 billion, 5% of turnover, to reflect the potential costs of a suspension of activities in Russia at a time when over 400 large companies they withdrew from the country after the invasion of Ukraine.

At the same time, by agreeing with Russia on a traditional negotiation for the sale of the shares the government of Emmanuel Macron through Renault, he signaled that Paris and its industrial and capitalist system are not yet ready to define Moscow as a “pariah” and intend to keep negotiation channels open in every field. Is Russia no longer the partner it used to be? True, but she is not even an enemy to be demonized: Renault in a certain sense keeps open the feasibility of the diplomacy economic. And by understanding Moscow, France closes the possibility that Russia accelerates onexpropriation of companies as feared several times in recent months. The move has an eye on a less tense future: the French manufacturer has specified that by signing the agreement. he kept the option of buying back his shares within the next six years. A decidedly long window of time, if you think about how the strategic, economic and security context of Europe has changed from 2016 to today.

“We have made a difficult but necessary decision, and we are making a responsible choice for our 45,000 employees in Russia,” said CEO Luca de Meo, commenting on the move agreed with Russia. The move preserved the group, leaving open the possibility of returning to the country in the future, in a different context, explained the manager. The French group acted in a precautionary manner: balancing the reputational risk given by the group’s approach to Russia, the presence within it of brands such as Dacia referring to countries (Romania) in this phase hostile to Russia, the fear of fragmentation of assets in the event of Russian expropriation and the French willingness to keep channels open with Moscow Renault has shown a real “economic diplomacy ” in times of asymmetrical war by transferring its assets to the Russian state in a non-irreversible form. That despite sanctions, economic wars and crossed challenges, he is still considered an interlocutor and even a partner with whom to do business for an important subsidiary of the French state eager to limit the damage, aware that between now and 2028, the year the buyback clause ends, everything can change. And this in the context of the French objective of detente with Moscow is news in itself.

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