French carmaker Renault SA’s alliance with Japanese partner Nissan Motor Co. has cost the French carmaker big time, leading to a record loss of $8 billion in 2Q.
Nissan partnership accounted for a loss of 4.8 billion euros, including 4.29 billion euros of impairments and restructuring costs, the automaker said.
This is a catastrophic failure and hopefully, it won’t lead to a bigger domino effect that may force the French car giant to embark on a short road to bankruptcy.
According to Bloomberg, The global car-making alliance, which also includes Mitsubishi Motors Corp., has been shaken to its core since the November 2018 arrest of Carlos Ghosn, who was chairman of all three companies. The partnership was meant to create a global powerhouse to compete against Volkswagen AG and Toyota Motor Corp. But an aggressive strategy fixated on volume growth proved wrongheaded when auto sales began to decline, and management turmoil has plagued efforts to adjust. Losses are now piling up, further testing their union.
“The No. 1 risk to the alliance is Renault,” said Koji Endo, an analyst at SBI Securities in Tokyo. “They’re supposed to strengthen each other and offset weaknesses, but the risks are starting to look much bigger than the opportunities.”
Renault shares plunged as much as 8.8% on Thursday and have fallen 47% this year.
Just like General Motors that posted a loss of $806 million and burned through billions of dollars of cash in 2Q, which was the worst three months of the year for the auto industry as the coronavirus pandemic shuttered factories and devastated sales, except for Tesla.
Is this the beginning of the end for some major car markers?, or will their Governments bail them out should in case of incasity?.