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Renault’s $2.4bn worth of Russian assets prove too toxic – Al Jazeera English

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For weeks, Renault was reluctant to join the mass exodus of companies from Russia but on Wednesday it caved.

By Bloomberg

Fifteen years ago, Vladimir Putin had a problem. AvtoVaz, maker of the favored car brand of the communist era, was the butt of jokes (How do you double the value of a Lada? Fill the tank.) The state-owned company was struggling to cope with competition from foreign automakers that ventured into Russia after the collapse of the Soviet Union.

Despite AvtoVaz’s troubles, when the Kremlin put a stake in AvtoVaz up for sale in 2007, Western manufacturers lined up. Renault prevailed over the likes of General Motors and Fiat, with Putin betting superstar executive Carlos Ghosn would respect the Russian identity of the company much like he had managed the proudly French and Japanese members of the word’s biggest auto alliance.

Landing Lada turned out to be a pyrrhic victory. Renault announced Wednesday it will write off the value of its €2.2 billion ($2.4 billion) worth of assets in Russia, an amount equivalent to roughly a third of its market capitalization. It’s also assessing options for its more than two-thirds stake in AvtoVaz, an operation with a whopping 45,000 employees.

For weeks, Renault was reluctant to join the mass exodus of companies from Russia. Shutting down plants and cutting off trade was going to be far costlier for the carmaker than its rivals. Renault sold more than 480,000 vehicles in the country last year, second only to France and more than double its deliveries in any other nation.

With no good options to choose from, Renault tried maintaining some semblance of status quo. Days after Russia invaded Ukraine, the company temporarily halted its assembly plant near Moscow due to supply and logistics issues. AvtoVaz succumbed to the same strains, but both set dates for when they planned to resume operations.

When Renault reopened the Moscow facility this week, the blowback was severe. A member of parliament called for a U.K. boycott, and Ukraine’s foreign minister followed suit soon after. Within hours, the company caved, suspending activity at the Moscow factory.

Renault was on shaky ground before Russia’s invasion. Ghosn’s unceremonious ousting from Nissan in late 2018 destabilized the two companies’ alliance almost to the point of complete rupture.

Chief Executive Officer Luca de Meo’s plan to turn Renault around called for the carmaker to make still-meager profit margins for years to come. Fitch Ratings has warned this tenuous recovery could be derailed. The company’s market capitalization has now fallen back below the value of its stake in Nissan.

De Meo hasn’t spoken publicly about what went into Renault management’s thinking about staying or going. If the reversal of decades of investment in Russia by foreign businesses is permanent, it could lift AvtoVaz — Lada used to command almost 80% market share. For the time being, however, sanctions will decimate the economy, and the asset has proven too toxic.

De Meo’s counterpart at Renault’s biggest rival, Stellantis CEO Carlos Tavares, is one of increasingly few Western bosses who has tried to justify keeping assembly lines running. He said early this month pulling out of Russia would hurt workers, not Putin.

“I don’t buy that we need to make announcements on pulling back or not,” Tavares told reporters. “What’s important is that we take care of the people.”

Given how quickly the pressure campaign on Renault forced its hand, Stellantis’ van factory near Moscow may not operate for much longer.

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Netflix’s subscriber growth slows as gains from password-sharing crackdown subside

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Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.

The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.

Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.

The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.

The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.

The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.

The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.

Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.

In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.

“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.

As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.

Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.

The Canadian Press. All rights reserved.

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