Renault will for the first time report a combined balance sheet with its alliance partner Nissan. The move is intended to raise the profile of the alliance partners on world financial markets and win cheaper credit.
Separately, Automotive News Europe reported, Nissan was No. 9 and Renault No. 10 in global vehicle sales in 2002, the latest year for which complete data are available. But combined, their 5.1 million sales would rank them No. 4, ahead of Volkswagen group and behind only General Motors, Ford and Toyota.
Renault’s 2003 annual report will include a “simplified balance sheet” joining the sales and operating profit of Renault and Nissan, Renault chief financial officer Thierry Moulonguet said in an interview. The annual report will be released in a few weeks.
“This is to give more weight to the alliance,” Moulonguet said. A combined balance sheet may convince credit rating agencies to upgrade their view of the creditworthiness of Renault and Nissan, analysts say. The better the rating, the lower the cost of borrowing funds.
Current ratings of the two companies by Standard & Poor’s and Moody’s Investor Services put their debt at medium-grade, meaning they are subject to moderate credit risk.
Since it took over a near-bankrupt Nissan in 1999, Renault has turned the Japanese company into the world’s most profitable volume carmaker.
Nissan has been generating enough profit to repay its debt and pay a generous dividend to Renault for its 44.4% stake. Renault, in turn, reduced its debt to 13% of equity by the end of 2003 from a ratio of about 50% after it took over Nissan. Renault says it intends to repay the debt in full within three years.
Last month Philippe Gamba, CEO of RCI Banque, Renault’s finance arm, told Automotive News Europe that he hopes Renault’s credit rating would be upgraded soon.
European volume carmakers such as Renault derive an increasing share of their profit from customer finance operations. The lower the interest rate at which finance arms can borrow, the higher their profit.