Renault CEO under pressure as lieutenant quits

By @ibtimes on

The departure of Renault's number two executive over a spying-turned-fraud debacle heaps pressure on Chief Executive Carlos Ghosn when the carmaker is trying to win investor support for its growth plans.

Chief Operating Officer Patrick Pelata resigned on Monday, taking the flak for an embarrassing fiasco in which Renault fired three executives on suspicion of leaking information on electric vehicles who turned out to have done nothing wrong.

Pelata's departure safeguards Ghosn's high profile role as head of both Renault and Nissan. But the clumsy handling of the affair and its fallout also raise questions about Renault's management.

Renault's image has taken a serious hit and the whole scandal won't go away with Pelata's departure, said Christian Jimenez, a fund manager and president of Diamant Bleu Gestion in Paris.

Unfortunately, it was inevitable to see heads rolling, but it doesn't change the fact that investors' confidence in Renault's management has been shaken, he said, though he added that Ghosn should still bounce back from this crisis.

Pelata had offered his resignation in March, when Renault admitted it had been tricked, but Ghosn refused to accept it, saying he did not want to add one crisis to another.

The management about-turn highlights the scale of government involvement in decision-making at Renault, which is 15-percent state-owned.

Ghosn will now face the challenges of Renault's new strategic plan without his key ally. And while Pelata will not leave immediately and will stay with the Renault-Nissan alliance, it is not immediately obvious who will replace him.

The French carmaker's six-year strategic plan, revealed in February, disappointed investors who were hoping for concrete steps to revamp the financial structure of the 12-year alliance and squeeze more value from it.

FILLING THE VOID

The implementation of the plan, which prioritizes international growth in a bid to boost profitability, will be key if Ghosn wants to win kudos from shareholders.

Renault is also taking a big gamble as it readies the launch of the first of the electric cars it hopes will make it a mass-market leader in the burgeoning technology later this year.

The Ghosn-Pelata double-act has worked well until now ... so it could be difficult to quickly find a replacement, which is a real problem, CM-CIC analysts wrote. Without Pelata at the helm, this plan could be disrupted, even delayed by six months to a year.

Ghosn and Pelata met at university and had perfected their complementary roles over many years of cooperation, with Ghosn handling strategy and Pelata implementation.

This decision (Pelata's exit) seems symptomatic of the group's management methods and of the involvement of the state in the group's internal affairs, the CM-CIC analysts wrote.

Government spokesman Francois Baroin said on Tuesday the state had never called for Carlos Ghosn's head though it did want sanctions.

There were investigations, the chain of responsibility was determined, measures have been taken and we take note of them, he told RTL radio.

By 1415 GMT, Renault shares were down 3.7 percent to 37.55 euros, one of the top fallers on the CAC-40 <.FCHI> index.

(Additional reporting by Blaise Robinson; Editing by David Cowell, Erica Billingham and Jane Merriman)

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