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Renault profit warning a challenge

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PARIS -- Auto industry watchers knew Carlos Ghosn was setting himself a tough task when he took up the Renault chief executive job and stayed on as head of Nissan as well.

But a surprise profit warning from the French carmaker, hit by flagging sales at home and a tired model line, has made that challenge clearer than ever.

Shares in Renault SA fell 4.9 percent to 66 euros ($77.07) in Paris on Thursday, after the company warned that weak sales in its home markets will hit 2005 profits.

With its most profitable vehicles now in decline -- Western European sales of the aging Megane fell 24 percent in the year to October -- and no new models scheduled for at least another year, all eyes are on Ghosn, whose turnaround of Nissan Motor Co. became a management case study.

The 51-year-old CEO is expected to unveil a new strategy for Renault in February, 10 months after he began the new job -- and the 10,000 mile commute to and from the old one.

Ghosn promised then to spend a little more time in Paris than in Tokyo, while retaining full managerial control of Nissan, 44 percent-owned by Renault. But some observers say Renault's current difficulties could force that to change.

"Maybe he'll have to have less of a controlling hand because he'll have his hands full back in Europe," said Edmund Shing, a Paris-based auto analyst with Kepler Equities.

"It may be that Renault shareholders put some pressure on him to spend more time at Renault and less time at Nissan."

New York hedge fund Paulson & Co., among Renault's biggest institutional shareholders with over 4 million shares, called the profit warning "unexpected." But Paulson does not plan to demand any management changes, spokeswoman Mina Gerowin said.

At 5.1 percent, Renault's operating profit margin was half of Nissan's last year, and former CEO Louis Schweitzer had warned of a slide to 4 percent this year before he handed over to Ghosn in April.

Amid high oil prices, low demand for cars in western Europe and tough competition from a leaner, restructured Volkswagen AG, Renault lowered its sights further late Wednesday, saying its full-year operating margin would be "closer to 3 percent than to 4 percent."


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Ghosn thinks Nashville is so gosh darn great, he should build Renaults out there and send them back to Europe. He could take advantage of the dollars slide against the Euro and he could do one of those PR campaigns like Toyota. "Renault-Nissan" has invested billions of dollars in America... B)

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The Ghosn boat is listing... I don't think the French will be making comic books about the "myth of a man" that the Japanese have. He could prove me wrong, but the Nashville move was just a shot across the nose of a man who is getting to big for his britches.

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The Ghosn hype is over. Fearless Prediction: Renault's current struggles and the effort to fix it will destroy all further progress for Nissan. They'll have another auto company aligned with them within 3 years.

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