(Bloomberg) -- Renault SA (PA:RENA) lowered its outlook for full-year sales as the French carmaker grapples with an auto market downturn and dismal results from partner Nissan Motor Co. (T:7201).
Revenue will be close to last year’s level rather than grow, according to a statement Friday. The company kept its forecast for a group operating margin of 6% and reported first-half operating income of 1.52 billion euros ($1.69 billion). The shares fell as much as 2.7% in Paris trading before erasing losses.
Renault’s results cap a mostly gloomy week for the automotive industry. Ford Motor (NYSE:F) Co. missed earnings estimates and gave a projection for 2019 profit that disappointed investors, while Tesla (NASDAQ:TSLA) Inc. posted a worse-than-expected loss. Suppliers also suffered, with Continental AG (DE:CONG) shaving its targets. Among the brighter spots, France’s PSA Group booked a record profit margin at its automotive division and Volkswagen (DE:VOWG_p) AG’s earnings beat estimates.
Renault took a hit in the latest reporting period from a decline in Nissan earnings to a decade low. The Japanese carmaker, in which Renault holds a 43% stake, doubled the number of jobs it plans to eliminate and unveiled new production cuts. It reported a 99% drop in first-quarter profit and an operating margin of 0.1%, blaming sales incentives and over-expansion under former Chairman Carlos Ghosn.
Nissan’s performance cut Renault’s profit by 21 million euros in the first half, after contributing 805 million euros a year before.
Renault is counting on new models, higher prices and cost-cutting measures to reach its profit targets in the second half, as well as its “fighting spirit,” Chief Executive Officer Thierry Bollore said in the statement. Sales fell 6.7% in the first half and operating income dropped 12%.
The alliance between Renault and Nissan has been teetering following Ghosn’s arrest in Japan in November on charges of financial crimes, which he denies. Renault Chairman Jean-Dominique Senard has pushed for a merger Nissan didn’t want, and upset the Japanese partner further by not informing it that it was in talks to combine with Fiat Chrysler Automobiles NV. Those talks have collapsed after the French government made it clear it wanted Nissan to support the Renault-Fiat deal before entering an agreement.
Bollore, speaking on a conference call with analysts on Friday, said there are no ongoing talks with Fiat Chrysler and “it’s a pity.”
The tensions within the Franco-Japanese alliance come as the auto sector is facing a slump in Chinese volumes, uncertainty regarding new rules on emissions in Europe and Brexit. France and Germany are also considering phasing out government incentives to buy new cars. Unit sales outside Europe slumped 13.9% in the first half, while European volumes were roughly flat.
“We are really making sure that we’re going to support, help and do everything possible to make sure that Nissan gets back on track,” Bollore said. Renault is ready to progress but “that’s not yet the case for Nissan.”
“Companies need to be in the same shape to make sure everything is moving forward at maximum speed,” he said. “Nissan has said they need alliance, and alliance isn’t the reason they are where they are in the situation they are in today.”
It’s unclear how Nissan’s woes will affect Renault factories, said Franck Daout, a representative of the carmaker’s CFDT union. Renault’s plants in Cleons and Le Mans make parts for Nissan cars, and the manufacturer makes the Nissan Micra in its Flins plant outside of Paris.
Nissan already shifted production of the X-Trail model from Sunderland in the U.K., citing Brexit concerns, and has announced a plan to cut 600 jobs at a plant in Barcelona.
