TOKYO/PARIS -- Renault posted its first profit and revenue drop in six years Thursday, amid declining China sales and a weaker contribution from alliance member Nissan Motor, in which it has a 43.4% stake.
The French-Japanese alliance, long celebrated as one of the most successful models of international partnerships, faces a sudden reversal of fortune as it enters its 21st year next month. Nissan expects a 20% drop in operating profit for the year ending in March, a third straight year of decline.
Despite the power struggle that has emerged after the exit of former alliance chief Carlos Ghosn, both Renault and Nissan understand that they have no alternative for survival but to strengthen the alliance, as technology giants enter the auto industry with next-generation offerings.
And so it was that new Renault Chairman Jean-Dominique Senard flew into Tokyo on Thursday afternoon, tasked with putting the alliance back on track. It was the first visit to Japan by Renault's top brass since Ghosn was arrested in November over allegations of financial misconduct.
"I want to get to know them more," Senard told reporters as he arrived at Haneda Airport. He said talks with alliance partners Nissan and Mitsubishi Motors will be important but declined to offer specifics.
Later in the evening, he met with Nissan CEO Hiroto Saikawa and Mitsubishi CEO Osamu Masuko at a hotel.
Renault's earnings results, the first since the resignation of Ghosn, the former chairman, showed net profit dropping 37% to 3.3 billion euros ($3.7 billion) in 2018. Revenue totaled 57.4 billion euros, 2% less than a year earlier, despite a 3.2% increase in unit sales to 3.88 million, a record high.
Sluggish results in China stood out. The country's ongoing trade dispute with the U.S. and its economic slowdown are pushing businesses there to compete more on price.
CEO Thierry Bollore said Thursday that it remains Renault's goal to make the alliance "irreversible."
The French company expects the global auto market to be stable in 2019 and wants to achieve a group operating margin of around 6%.
To overcome these difficulties, the partners are commencing talks on new measures to bolster their alliance in the post-Ghosn era.
Senard told reporters it is too soon to say whether he will assume the chairmanship of Nissan, previously held by Ghosn.
"The topic is the alliance's stability," Saikawa said at a news conference Thursday evening. "We will discuss several ways to achieve that. We have not talked about a merger or the Nissan chairmanship."
Saikawa apparently asked Senard to visit Japan at their first alliance meeting together in the Netherlands late last month. Senard also is slated to meet with Nissan executives Friday, laying the foundation for cooperation to rebuild their alliance.
Since Ghosn's arrest on financial misconduct allegations three months ago, cracks have appeared among the partners.
Nissan will stop producing its Rogue sport utility vehicle, a popular model in North America, at its French partner's South Korean subsidiary Renault Samsung Motors in September. That will deliver a huge blow to Renault Samsung, which dedicates about half its production capacity to the Rogue. No replacement has been revealed yet, given Renault's weak sales power in Asia.
Though Ghosn left behind a legacy of excessive expansion, he also pursued profit for the whole alliance by using his tremendous authority to keep each company's individual aspirations in check. The three leaders will need to discuss a new system for cooperation among themselves while repairing the issues Ghosn left behind.
Nissan's operating margin for the nine months through December was 3.7%, compared with around 5% in fiscal 2017. Renault's operating margin was 6%. Both automakers are far behind industry leaders, including Toyota Motor at 8%. The three-way alliance likely will have difficulty achieving its sales target of 14 million cars per year by 2022 as well.
The French government, Renault's largest shareholder, shares that understanding despite its reported tough stance on Nissan. French employment and investment would be harmed should the alliance lose competitiveness. Paris was deeply involved in Senard's appointment and likely entrusted him to repair Renault's relationship with Nissan.
The Japanese automaker will hold an extraordinary shareholders meeting requested by Renault in April. The partnership is slowly regaining stability as well, with Bollore taking over as chairman of the alliance holding company.
Ghosn resigned from his position as the head of Renault in January. The company's board decided unanimously Wednesday to not pay him two years' worth of compensation after the French government cautioned the automaker over the matter. The board said it will decide Ghosn's 2018 remuneration at a March 15 meeting.
Nikkei staff writer Keiichi Furukawa in Tokyo contributed to this report.