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Renault 2006 sales fall on slump in European demand

Renault SA, France's second-largest carmaker, said 2006 global vehicle sales fell as western European deliveries slumped and the company lost market share to Volkswagen AG, Toyota Motor Corp. and a resurgent Fiat SpA.

Sales of the Renault SA, Dacia and Samsung brands dropped 4% to 2.43 million cars and light trucks, Patrick Blain, head of sales, said today at Renault headquarters in Boulogne-Billancourt, France. European demand dropped 8.7% to 1.69 million vehicles. Carlos Ghosn, chief executive officer of both Renault and Japan's Nissan Motor Co., will bank on new versions of the Twingo city car and Laguna midsized hatchback, as well as a station wagon model of the Dacia Logan, and spending cuts to improve sales and earnings this year to reach a 6% operating margin in 2009.
„Renault is waiting for a breath of fresh air in the form of new models to push it forward,” said Emmanuel Soupre, a fund manager with Neuflize Gestion in Paris, which oversees about $15 billion in assets, including Renault shares. Renault shares, which have risen 30% in the past 12 months, stagnated in the last four months of 2006, gaining just 0.1%, as the carmaker's European sales drop accelerated. The stock today fell as much as 80 cents, or 0.9%, to €90.4 and were 0.7% lower at €90.55 at 9:27 a.m. in Paris.

The French carmaker has shifted focus back to improving profit after talks on General Motors Corp. joining its partnership with Nissan collapsed in October because of GM's demand for payment to take part in an alliance. Ghosn said October 11 that Renault and Nissan won't immediately pursue ties with other automakers. „The sales graph for Renault this year in Europe will be in the form of a V, with the low point during the summer or in September at latest, as the Twingo and Laguna are released,” Blain said. „We should have a slight sales growth globally for the year.”
The company still expects to report earnings before interest, taxes and one-time items equal to 2.5% of sales for 2006, Andrew Boyle, a spokesman, said yesterday, a decline from 3.2% in 2005. Blain declined to comment today on profit, noting that Ghosn will report earnings on February 8. Ghosn on September 28 reiterated his „commitment” to achieving a 3% operating margin for Renault in 2007 and a 4.5% margin in 2008, adding that the French and Japanese carmakers don't need a partner to remain healthy and profitable. Renault owns 44.3% of Nissan.

Renault's sales in Europe fell as customers turned away from Renault's Megane and Laguna cars to competitors' newer models such the Volkswagen AG's Passat midsized sedan and Toyota Motor Corp's RAV4 sport-utility vehicle. Renault will release a compact SUV, its first, at the end of this year. Global sales of the Megane were 681,444 last year, while Laguna sales totaled 83,123. Renault didn't have immediately comparable figures for 2005. According to the company's annual report, Megane sales totaled about 803,000 cars while Laguna production was about 114,000 units. Renault said its global sales should „experience a slight increase in 2007,” entirely in the H2.

A year ago, Renault predicted 2006 deliveries in Europe would be little changed as the new Clio subcompact balanced falling sales of the rest of the lineup. New registrations of Renault vehicles in western and central Europe fell 10% for the 11 months through November to 1.24 million vehicles, according to the European Automobile Manufacturers Association.

Over the 11-month period, Volkswagen's sales rose 5.9% to 2.89 million passenger vehicles, demand for Toyota's cars jumped 10% to 833,488 units and Fiat SpA's registrations surged 18% to 1.08 million vehicles thanks to demand for the Grande Punto hatchback. Ghosn has posted six straight years of record earnings at Nissan and plans to post a seventh for the 12 months ending March 31, 2007. Nissan on October 26 also said sales in the US will surge by at least 10% in the current fiscal half, with the release of nine new models over that period.
His plan for Renault calls for increasing vehicle sales by 800,000 units by 2009 to 3.33 million cars and light trucks from last year's 2.53 million vehicles. Renault sells about 70% of its cars and makes nearly all of its operating profit in western Europe. Outside of Western Europe, Renault is doing better. Sales by Renault Samsung Motors Co., the carmaker's South Korean unit, rose 2% to 121,831 units. Demand for Dacia, the division in Romania that produces the Logan sedan and sells it for an average of €8,500 in that country, rose 20% to 196,592 vehicles. Overall, group sales outside of Europe rose 8.8% to 742,019 cars and light trucks. (Bloomberg)