If Ghosn gets the axe, so too may Renault’s F1 program

Renault SA Chief Executive Officer Carlos Ghosn needs a new blockbuster to pull Europe's worst-performing auto stock out of a nosedive and defend his reputation. He may not get it when he introduces the revamped Megane compact at the Paris Motor Show this week.

Ghosn unveils the car as key models are losing ground to Volkswagens, Peugeots and Fiats. To keep sales growing, the Boulogne-Billancourt, France-based company has relied on the low-cost Logan sedan in emerging economies, where sales are beginning to slow as the global financial crisis take hold.

“The tide's turning against them now,'' said Stuart Pearson, an analyst at Credit Suisse in London who switched his rating on Renault to “underperform'' from “outperform'' yesterday. “The international markets that were Renault's strength are becoming its Achilles heel, and the new Megane isn't going to be enough to meet next year's targets.''

Renault's share of the western European market dropped to 7.7 percent in the first eight months of this year from 9.7 percent in 2005 — when Ghosn took over — even as it outspent rivals on model development. Two years ago, Ghosn vowed to post a 6 percent operating margin by 2009 or “take the consequences.''

Renault's share price has plunged 54 percent this year, the worst performance in the 13-member Dow Jones Stoxx 600 Autos & Parts Index, while 12th-ranked Peugeot has dropped 49 percent. Renault rose 54 cents, or 1.2 percent, to 44.56 euros in Paris today, valuing the company at 12.7 billion euros.

Ghosn, 54, cemented his reputation as “Le Cost Killer'' with his turnaround of Tokyo-based Nissan Motor Co., where he threatened to resign unless objectives were met. He remains CEO of Nissan, which is 44 percent-owned by Renault.

Rather than step down from Renault if he misses targets, Ghosn is likely to face pressure to relinquish his Nissan role, said analysts including Michael Tyndall of Nomura Securities.

“It's increasingly unlikely he'll deliver on his promises, so he will have to placate some mightily unhappy shareholders,'' said Tyndall, who recommends buying Renault shares. “They need to hear from him more and see him more.''

If Renault keeps bleeding red ink and Ghosn gets the boot, don't be surprised if Renault makes a quick exit from F1. If Alonso were smart he'd jump ship now.