Latest stock and trading news – live updates

PARIS — French automaker Renault announced Monday that it would pull out of Russia in a deal brokered with the Russian government that would give Renault the option to resume business in the country at a future date.

Under the deal, Renault will sell its 68 percent stake in AvtoVAZ, Russia’s largest automaker, to a Moscow-based automotive research institute known as NAMI. Renault did not disclose the price, but a person with knowledge of the situation, who spoke on condition of anonymity to discuss details that were not made public, said the carmaker received the symbolic sum of 1 ruble.

NAMI would continue to operate AvtoVAZ’s two expanding car factories and pay their employees. Renault could buy back the stake within six years, Renault said in announcing the deal.

“Today we have made a difficult but necessary decision, and we are making a responsible choice towards our 45,000 employees in Russia,” said the French carmaker’s CEO, Luca de Meo.

Renault did not immediately disclose how much it is receiving for the stake. The company said it would take a 2.2 billion euro ($2.3 billion) financial hit in the first half of the year from the sale, and has sharply lowered its financial outlook for 2022.

Russia’s deal with Renault offers a window into how the Kremlin is trying to create opportunities for Western companies to do business there again as the dust settles from President Vladimir V. Putin’s brutal invasion of Ukraine.

Western companies have come under immense pressure to divest from Russia, with hundreds of them suspending operations or exiting ventures with Russian partners, increasing pressure on the Russian economy. On Monday, McDonald’s said it would sell its Russian business to a local buyer.

Russian industry and trade minister Denis Manturov earlier said that AvtoVAZ, the maker of Lada, Russia’s best-selling car, would likely be handed over to NAMI for care “with the possibility of a buyback, if our colleagues decide to return.”

Credit…Gleb Stolyarov/Reuters

The Kremlin has maintained since the beginning of the war that Western companies were withdrawing from Russia mainly due to political and social pressure, rather than economic reasons.

But while Putin has threatened to nationalize Western companies that leave, the government is also employing other mechanisms, such as the one negotiated with Renault, that could encourage companies to eventually return.

Russia is Renault’s second largest car market after France, comprising about 10 percent of global sales. In 2008, Carlos Ghosn, Renault’s chief executive at the time, agreed to partner with AvtoVAZ with the direct blessing of Putin, who wanted a foreign partner to help improve quality and saw Ghosn as the man who could get the job done. .

Renault’s partnership with AvtoVAZ added to Ghosn’s high salary at the time, drawing scrutiny from some Renault shareholders. However, the deal eventually made Renault Russia’s largest automaker, annually pulling 500,000 Lada and Renault brand cars off its assembly lines for an increasingly wealthy cadre of Russian consumers.

However, in March, Renault announced it would halt operations at a plant in Moscow and reassess its partnership with AvtoVAZ, after Western sanctions blocked imports of computer chips and other parts needed for cars. The announcement came hours after President Volodymyr Zelensky of Ukraine, addressing the French Senate, called on Renault and other French multinationals to leave Russia.

Renault had initially sought to keep its Russian factories running, even as Russia swooped in on Ukraine, citing the need to continue producing for the local market. In closed-door meetings early in the conflict, French government officials urged top executives to avoid making rash decisions to leave.

The French state owns a 15 percent stake in Renault and holds a board seat. President Emmanuel Macron said during a press conference in March that French companies should be “free to decide for themselves” whether to stay in Russia.

Credit…Yuri Kadobnov/Agence France-Presse — Getty Images

Renault, like other Western companies, also needed to keep paying its employees, especially after Moscow said it would penalize foreign companies that stopped paying workers.

But Western limits on shipping parts to Russia soon made it impossible for the two factories to continue operating.

Western sanctions against Russian oligarchs close to Putin have also taken their toll.

Renault’s partner in AvtoVAZ is Russian Technologies Corporation, known as Rostec, which owns a 32 percent stake in the company through a Dutch holding company. Rostec is run by Sergei Chemezov, who came under Western sanctions after the Russian invasion. Mr. Chemezov is reported to be a former KGB agent who worked with Mr. Putin in East Germany before the fall of the Soviet Union.

Chemezov, who was a key interlocutor with Ghosn in the 2008 deal between Renault and AvtoVAZ, has strongly defended Russia’s war in Ukraine as “necessary”. Among other things, Rostec also manufactures Russian Kalashnikov assault rifles, as well as ammunition, military equipment and aircraft engines.

With Russia’s economy facing a sharp economic downturn due to international sanctions, Moscow seems eager to silence the pain. Under the agreement, Renault’s factory in Moscow will continue to produce cars. Sergei Sobyanin, the mayor of Moscow, announced on his blog on Monday that the city will take over the plant, which will make Moskvich-branded passenger cars so that thousands of employees “don’t lose their jobs.”

Renault considered the option of being able to buy back its stake in AvtoVAZ, an important part of any deal, according to a person with knowledge of the situation. But any future buybacks would depend on current geopolitical circumstances and the state of Western sanctions against Russia, the person added.

Renault officials had no further comment. But Mr Ghosn has not hesitated to speak out. In an interview with France’s BFM TV last month from his home in Lebanon, where he lives as a fugitive after escaping a criminal investigation in Japan in 2019 for alleged financial misconduct as head of the Nissan-Renault-Mitsubishi auto alliance , said. that the political pressures that had built up on Renault to leave Russia were “a shame”.

“Russia is not going to disappear,” he said. “It is a great country that is going through a difficult stage today. Obviously, Ukraine even more so. But the market will stay and one day or another the situation will return to normal”.

Add Comment