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Renault : MOU on Purchase of DACIA

With a view to acquiring a 51% stake in the Romanian car manufacturer Dacia, Renault signs an MOU with the Romanian authorities and State Ownership Fund

Paris, Jan. 7, 1999 - Renault signed a memorandum of understanding in Bucharest with the Romanian authorities and State Ownership Fund to determine the framework for negotiations prior to the acquisition by Renault of the 51% stake in Dacia held by the Romanian State. These negotiations will focus on the content of Renault's proposal and on the exemptions from taxation and customs duties granted by the Romanian State. Renault's proposal comprises on the one hand a payment in cash for the acquisition of a majority interest, and on the other a capital expenditure and cost-reduction programme. The initial objectives of this two-pronged programme are to ensure the development of the Dacia marque and secure its long-term future, by upgrading its industrial facilities and commercial base. The takeover of Dacia, by adding a second marque to the Group, would contribute to Renault's strategy of profitable growth in new markets.

By signing a memorandum of understanding with the relevant Romanian ministers and State Ownership Fund, setting the framework for negotiations prior to the acquisition of a 51% stake in the capital of "S.C. Automobile Dacia S.A. Colibasi", Renault confirms its intention announced in August to participate in the future development of the Pitesti-based car manufacturer. Renault's bid is accompanied by an industrial and commercial programme focusing on investments, modernization and cost reductions. The objective of the programme is to make Dacia a second marque for the Renault Group with responsibility for producing, in time, a vehicle of less than 6,000 dollars, for sale in local and emerging markets. Renault is targetting an output of 200,000 vehicles a year in Romania by the year 2010, approximately 80,000 of which would be exported to emerging countries.

The programme provides for a gradual, in-depth transformation of Dacia's industrial facilities, supplier network, distribution system and existing products, vehicles and powertrains. The programme will unfold in three stages. The objective of the first stage, between 1999 and 2000, is to renovate and upgrade existing products and processes. This stage will be limited to current volumes. It must lead to Dacia attaining a standard of quality, which will enable it in a second stage, between 2001 and 2003, to launch a new vehicle to replace the current Dacia 1310. Based on current thinking, this vehicle would be derived from the Renault 19 saloon. The third stage, starting in 2004, is intended to make Dacia a second marque for the Renault Group, with the launch of a modern vehicle selling at less than 6,000 dollars and intended exclusively for local and emerging markets.

Renault proposes a cost-reduction plan to run on a parallel with the various stages of the strategic project, in order to bring Dacia's industrial system and its commercial network into line with international standards of quality and competitiveness, preserve the identity of the Dacia marque and ensure its long-term existence.

Renault has been active in Romania since 1966 and was instrumental in creating an automobile industry in the country. Renault and Dacia have been closely linked for over 30 years. Dacia assembled different Renault models under licence up to 1978, prior to building them under its own marque. Most of the vehicles currently produced by Dacia (1300 range) are derived from former models from the Renault product range (notably the R12 with different body styles), which Dacia has gradually updated. These vehicles today make up most of the current vehicle population in Romania.

Dacia employs some 29,000 people and produces each year over 100,000 passenger cars and light commercial vehicles in its Colibasi plant located next to Pitesti, 140 kilometres to the north-west of Bucharest. The proportion of local content is very high. With a market share of 77%, the marque is the undisputed leader of the passenger car market, estimated at 93,000 vehicles for 1998. Dacia exports each year approximately 10% of its production, mainly to neighbouring markets, as well as to Egypt, Argentina and China. The other manufacturers with industrial operations in Romania are Rodae (in which Daewoo has a controlling interest, 5.9% of the market in 1997) and Aro, a Romanian manufacturer of small four-wheel drive vehicles (1.7% of the market in 1997).

Owing to the low incomes of the local population, the Romanian automobile market is made up predominantly of low-priced vehicles (starting at 3,000 dollars for vehicles in the Dacia range) and used vehicles. Volumes are low for imported vehicles. Renault, operating in Romania through its importer Ipso, is planning to sell over 1,000 units this year in the market for imported vehicles.


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