Renault (RNO FP): Issues to consider​

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Background
Renault has had a string of issues since Mr Carlos Ghosn was arrested in Japan. The relationship with Nissan has been problematic and sales have slowed even prior to the COVID crisis. Mr Senard, the new Chairman, believes the company is in turnaround mode and has been very positive.   He thinks their car alliance, Renault, Nissan, Mitsubisihi and possibly Daimler is on the verge of great things.

Issues to consider
Assets

• How do they justify valuing the Nissan stake with a 2.25% perpetuity growth rate? Especially now Nissan is cutting production.
  
• How do they reconcile the fact that while capex has risen, their depreciation rate has fallen?
• They talk about cost cutting measures and cash costs. What about write-offs and redundancies?
• Why is investing in expensive France better than investing in Romania?

Board of directors

• Why is no-one on the board taking responsibility for the Ghosn fiasco?
• Why is th board continuing to support the use of unconsolidated slush funds?
• Why is the board still relying on E&Y?
• Why does the board not own a material amount of stock?
  

Operations

• Why does Renault's productivity continue to fall and why is it so far below its peers?
• Renault has cumulatively lost money over the last 17 years. What is being changed?
• Why is their no provision for diesel emission fines?
• Why does manufacturing subsidise the bank?
• Why are the residual value financing deals kept in manufacturing?​

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Annual Report 2019

Alliance, flip

Cost-reduction, flip

Cost-reduction, press

Governance, flip

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Important
This note is written with the sole purpose of highlighting some issues we think are important.
It is not a recommendation to BUY or SELL any of the securities mentioned and should not be taken as such.
​Readers should form their own opinions about the company and seek appropriate advice.
Please read the Bucephalus disclaimer.