Renault CEO: F1 good investment, for now

Speaking at a news conference today, Ghosn was adamant Renault has no immediate plans to withdraw from Formula One, but the Brazilian said the French company will continually review its investment in the sport.

Asked by reporters whether Renault is committed to Formula One, Ghosn replied: "You are asking a question without a time limit, in fact you are asking the question and saying 'are you committed indefinitely'. I don't know.

"If it is in Renault's interest to stay, we will. 2007, then 2008, then 2009. We will take it year by year, session by session, result by result. As long as it remains a good investment for Renault, we will stay. The day that it is no longer, we will go.

"At the moment, it is a good investment for Renault. I am confident that the team we have at the moment, that won a double championship in 2005, will be fighting for good results in 2006."

Ghosn further reiterated that long term changes to the Formula One regulations could also have an effect on Renault's decision to stay or to leave.

"There will changes to the rules of F1 in 2007/8, which we are analysing, and on an extremely objective basis, we will decide the length of our commitment in light of that," he said.

"For the moment, we are moving forward, we are fighting and, what is very important in my view, we are proving, through Formula One, what Renault is capable of, and that the cost of Formula One is in fact an investment."

Today's comments come ten days after Ghosn dismissed recent speculations that Renault is set to withdraw from Formula One at the end of the year.

"As long as we continue to perform well and offer a good show and be at the top level of F1, then there is no question about the future," he said at the launch last week. "As long as F1 has a good return for manufacturers and investors, then we should be there."

The news of Renault's intentions for Formula One came as part of a strategy review for the road car company, where the carmaker unveiled plans to revive its fortunes, as it posted a steeper-than-expected decline in core 2005 profits on Thursday.

The French carmaker plans to develop a luxury range and sell 800,000 more cars. Sports utility vehicles will also be among 26 new models the Renault group plans to introduce between 2007 and 2009 to try to make itself the "most profitable car company in Europe."

The plans represent a move by Brazilian-born Ghosn to overhaul Renault's strategy, polish up its model line-up and enlarge its regional reach to counter declining core financial performance at Europe's third largest carmaker.

He did not unveil plant closures but told Renault workers that the success of the plan was indispensable in order to avoid industrial restructuring.

"Renault is not in crisis but remains fragile," Ghosn said. "Renault does not need restructuring at the moment. What Renault needs is growth, new products and a good brand image."

A new Laguna model to be launched in 2007 will be the group's test to re-enter the luxury segment and Ghosn said the car had to be among the best three in its segment.

The company posted a 2005 gross operating profit of 1.32 billion euros ($1.6 billion), down 37.4 percent from 2004 and below a median analysts' consensus of 1.39 billion euros.

In percentage of sales the margin declined to 3.2 percent in 2005 from 5.2 percent in 2004 and Renault predicted a further drop this year.

Renault shares fell 3.6 percent to 73 euros.

Tough to Crack

Analysts welcomed the decision to move into new models to broaden its product range, but said the luxury market could be tough to crack because of fierce competition.

"Focusing on product is absolutely necessary, to get away from an over-dependence on one product - the Megane," said Sabine Blumel, European Auto Analyst at Banca IMI in London.

The company said higher raw material costs than last year, a competitive European market and continuous international growth would mean an operating margin of 2.5 percent of revenues in 2006 and stable unit sales compared with 2005.

Renault, privatised in 1994 after a failed marriage with Swedish carmaker Volvo , has been overly dependent on its home market and its financial fortunes are closely tied to the success of the Megane, first launched in 1995 and still Europe's best-selling car.

Ghosn said he wanted the number of cars sold to be 800,000 higher per year by 2009 compared with the 2.5 million sold in 2005. Of the new cars sold, 250,000 would be in Europe.

That appeared less ambitious than the 4 million-a-year that Renault had been aiming for under its previous chief executive.

Ghosn said Renault would continue to participate in Formula One car racing as long as it continued to be a good investment. But he said this would be reviewed every year.

It would not attempt to enter the U.S. market for now.

He said the company planned to cut purchase costs by 14 percent over three years and manufacturing costs by 12 percent.

Bridge-playing Ghosn, 51, has been chief executive at Renault since May 2005 while still heading Nissan , in which Renault has a 44 percent stake. The star manager was widely credit for turning around the once-ailing Nissan.

Renault said it did not plan to sell its stakes in the Japanese car maker or in Volvo.

Net income in 2005 rose to a record 3.37 billion euros from 2.84 billion, the carmaker said, mainly due to earnings from the participations.

Revenues rose 1.9 percent to 41.34 billion euros.

Renault said it planned to hike its dividend by a third to 2.40 euros per share for 2005 from 1.80 euros, and would boost the dividend each year to reach a target of 4.5 euros in 2009.