Renault has to write off almost 2.2 billion euros on the Russian business.
(Photo: Reuters)
Paris Renault’s withdrawal from the important Russian business is official: the French carmaker confirmed on Monday that it would sell its almost 68 percent stake in the Lada manufacturer Avtovaz to the Russian state research institute Nami. The Renault plant in Russia goes to the city of Moscow.
The Russian government previously announced the deal and quoted a symbolic purchase price of one ruble. According to the company, the board of directors of Renault now agreed. The French did not provide any information on the purchase price, but spoke of a write-down of around 2.2 billion euros on the Russian business.
“The completion of this transaction is not subject to any conditions and all necessary approvals have been obtained,” Renault said in a statement. CEO Luca de Meo says: “Today we made a difficult but necessary decision.” The company found a “responsible” solution for its 45,000 employees in Russia and secured a possible return to the Russian market in the future.
According to the agreement, Renault can buy back its stake in Avtovaz over the next six years. In fact, not only the Russian war of aggression against Ukraine would have to end for this, but also the Western sanctions imposed on Russia because of the war.
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At the end of March, due to the geopolitical situation, Renault announced that it would suspend its “industrial activities” in the company’s important and profitable market with immediate effect. Russia accounted for nearly a fifth of Renault Group car sales last year. In addition to the majority stake in Avtovaz, the French also operated a site near Moscow, where, among other things, the SUV model Captur was produced.
Research Institute Nami is not affected by sanctions
Numerous Western companies have withdrawn from Russia because of the Ukraine war. Renault initially hesitated, but came under increasing pressure in the spring. Ukrainian President Volodymyr Zelensky urged Renault to leave Russia. The Ukrainian Foreign Minister Dmytro Kuleba even called for a boycott of the French car company.
According to French media reports, the search for a way out of the Russian business was not easy for the Renault management. A deal with the armaments and industrial conglomerate Rostec, which is on Western sanctions lists and which owns the other 32 percent of Avtovaz, was ruled out.
In the end, the choice fell on the Nami research institute, which is owned by the Russian state but is not affected by the sanctions. However, the institute has no experience in operational management. Rostec will therefore probably set the tone at Avtovaz in the future.
Shortly before the start of the war in February, after years of record losses, Renault announced that it would be back in the black. However, the restructuring program initiated by former Seat boss de Meo, which combines tough cost-cutting with a focus on a higher-priced product range and electric cars, is facing strong headwinds from the effects of the Ukraine war.
The CEO was confident on Monday: “I have confidence in the Renault Group’s ability to accelerate its transformation and to exceed its medium-term goals.”
More: Renault is withdrawing from Russia – restructuring course in danger.