French carmaker Renault posted a wider-than-expected net loss and said on Thursday it would focus on generating positive free cash flow in a tough 2010 market.

Hit, like its peers, by the economic downturn, Renault posted improving results toward the end of 2009 after many governments introduced scrapping incentives to prop up sales.

Renault said it expected economic conditions to remain tough in 2010, and it saw a 10 percent drop in the European market as a whole this year. It did not make an earnings forecast.

Frankly we think that in 2010 there is still a lot of uncertainty and volatility and we don't want to spend our time every month correcting the earnings guidance, said Chief Executive Carlos Ghosn, also head of Renault's Japanese ally Nissan Motor Co Ltd <7201.T> which this week returned to a third quarter profit and raised its full-year target.

We think that 2010 is particularly obscure, Ghosn said, adding the year was getting off to a good start in orders.

Renault shares fell 4 percent by 1000 GMT (5 a.m. EST), lagging a DJ Stoxx European Autos index <.SXAP> down 0.85 percent.

As with Peugeot yesterday, the outlook is not very clear, said a Paris-based analyst. Of course, there is a plan to reduce costs, but that's not enough.

PSA Peugeot-Citroen

posted widening losses and refused to give an outlook beyond mid-year.

Last year, European new car sales fell just 1.6 percent despite a savage crisis, thanks to the scrapping measures, but the market is expected to drop more this year.

The group wants to achieve positive free cash flow in 2010, after achieving the same objective in 2009.

It said cost-cuts, new products, control of working capital requirements and alliance synergies would help achieve this.

It also set a new target for 1 billion euros of synergies with Nissan for 2010, after achieving 1.5 billion last year.

Renault posted a full year net loss of 3.068 billion euros, wider than the Thomson Reuters I/B/E/S estimate of a 2.59 billion euros net loss.

The loss -- compared with a 2008 net profit of 599 million euros 2008 -- included contributions from Nissan and stakes in truckmaker Volvo and AvtoVAZ , the beleagured Russian car maker in which it has a 25 percent stake.

SMALL H2 LOSS

Renault posted a full-year operating loss of 955 million euros, but only 9 million of that came in the second half, it said.

Full-year sales fell 10.8 percent to 33.7 billion euros, but the group said it saw a 25 percent increase in the last quarter of 2008, compared with a very weak fourth quarter 2009.

The group is currently working on a new medium-term plan and hopes to present it at the start of 2011, Chief Financial Officer Thierry Moulonguet told reporters. He added he could not say what if any financial targets would be included.

I don't have any details at this stage, he said.

The group was forced to drop a previous highly ambitious margin plan for 2009 when the crisis hit.

Renault cut its automobile division debt by 2.02 billion euros to 5.92 billion euros by the end of the year.

Ghosn said he wanted to cut debt further and would look at divesting assets, although it would not be pressured into any sales at unfavorable levels. We're not under the gun, we're not giving ourselves any milestones, but I want you to know that I consider any debt above 3 billion euros as abnormal, he said.

The perfect situation is no debt, he added.

Ghosn said he believed the light commercial vehicle market had reached its low point, after a tough 2009 as businesses pummeled by the crisis put off replacing their vehicles.

We believe the bottom of this market has been reached, but we still do not expect to see any significant growth in 2010.

(Additional reporting by Gilles Guillaume; Editing by Marcel Michelson and Jon Loades-Carter)

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