2004 ANNUAL REPORT REGISTRATION DOCUMENT Contents Report approved by the Board of Directors on February 22, 2005 Renault Group strategy 3 Main subsidiaries 1 5 and organization chart 291 1.1 Presentation of Renault and the Group 4 1.2 The Renault-Nissan Alliance 17 5.1 Main subsidiaries 292 1.3 The profitable growth strategy 45 5.2 Organization chart 296 Corporate governance 54 Legal information about Renault 299 2 6 2.1 Composition and operating procedures 6.1 General information 300 of the Board of Directors 56 6.2 General information about 2.2 Composition and operating procedures Renault’s share capital 302 of management bodies at January 1, 2005 67 2.3 Audits 70 2.4 Interest of senior executives 72 Mixed General Meeting 7 of April 29, 2005 draft resolutions 305 2.5 Renault and its shareholders 76 2.6 Risk management 83 7.1 Presentation 306 2.7 Report of the Chairman of the Board 7.2 Text of resolutions 311 of Directors - art. 117, Financial Security Act (2003-706, August 1, 2003) 103 2.8 Auditors’ report on the report of the Chairman 112 8 Supplemental information 319 8.1 Internal regulations of the Board of Directors, Director’s Charter and procedure concerning Renault’s performance in 2004 114 the use and/or communication of insider 3 information 320 3.1 Economic performance 116 8.2 Environmental data 331 3.2 Employee relations performance 158 8.3 Global Reporting Initiative indicators and Global Compact 3.3 Environmental performance 177 principles: cross reference table 338 3.4 Research and development policy 200 3.5. Social performance 204 3.6 Key objectives for environmental, social and employee relations performances 219 Statements 223 4 4.1 Consolidated financial statements 224 4.2 Parent company financial statements 272 2004 Annual report SUSTAINABLE DEVELOPMENT REPORT REGISTRATION DOCUMENT 2004 ANNUAL REPORT - RENAULT 1 2 REGISTRATION DOCUMENT 2004 - RENAULT RENAULT GROUP STRATEGY ▲ Renault Group 1 strategy 1.1 Presentation of Renault 1.3 The profitable growth strategy 45 and the Group 4 1.3.1 Goal 1: Build recognition 1.1.1 Background and highlights 4 for our brand identity 45 1.1.2 Renault shareholders on December 31, 2004 5 1.3.2 Goal 2: Be the most competitive manufacturer on our markets in terms 1.1.3 Five-year consolidated figures 6 of quality, costs and delivery times 46 1.1.4 Main activities 6 1.3.3 Goal 3: Extend our international reach 48 1.1.4.1 Automobile Division 7 1.3.4 Goal 4: Develop Renault’s core values 49 1.1.4.2 Sales Financing Division 15 1.1.4.3 Strategic shareholdings 16 1.3.5 Goal 5: Translate success into financial performance 52 1.2 The Renault-Nissan Alliance 17 1.2.1 The Alliance’s fifth anniversary 17 1.2.1.1 Vision - Destination 17 1.2.1.2 Renault’s major achievements 18 1.2.2 Operational structure of the Renault-Nissan Alliance 23 1.2.2.1 Main stages in the construction of the Alliance 23 1.2.2.2 Governance and operational structure 23 1.2.3 The status of Alliance projects 27 1.2.3.1 The emergence of new CCTs 27 1.2.3.2 Structural cooperation 29 1.2.3.3 Regional cooperation 31 1.2.3.4 Human Resources in the Alliance 33 1.2.4 Nissan strategy and results in 2004 34 1.2.4.1 Nissan’s strategy and growth 34 1.2.4.2 Nissan’s 2004 contribution 37 1.2.5 Overall sales and financial performance of the Alliance 38 1.2.5.1 Industrial and commercial presence 38 1.2.5.2 Value of joint operations 42 1.2.5.3 Financial information on the Alliance 42 2004 ANNUAL REPORT - RENAULT 3 ▲ 1 RENAULT GROUP STRATEGY 1.1 Presentation of Renault and the Group 1.1.1 Background and highlights 1898 Société Renault Frères was formed in 1898 to manufacture 1999 1999 marked the start of a new era in Renault’s history with the motor vehicles, taking advantage of patents such as the signing of an Alliance with Nissan, on March 27 in Tokyo. In first direct-drive transmission. Based in the Paris suburb the same year, Renault acquired a new brand by taking a 51% of Billancourt, the company achieved international renown stake in Romanian carmaker Dacia. through its success in motor sports, and initially specialized in the construction of passenger cars and taxis. During the First 2000 In 2000 this expansion continued, with Renault raising its stake World War, it produced substantial volumes of trucks, light in Dacia to 80.1% (increased to 92.7% in 2001) and acquiring tanks and aircraft engines. a new brand – Samsung Motors in South Korea. In 1922, having expanded strongly in the passenger car and 1922 2001 In 2001 Renault sold Renault V.I. to Volvo and became the commercial vehicle markets, Renault became a limited main shareholder in the Volvo group, with a 20% stake.The two company. Establishing production centers in France and abroad, companies joined forces to form the world’s second-biggest Renault gradually emerged as the French market leader. truck manufacturer. In January 1945, the company was nationalized and renamed 1945 2002 In 2002 Renault and Nissan implemented the second stage “Régie Nationale des Usines Renault” and concentrated on of their Alliance, aimed at strengthening their equity ties and producing the 4 CV. creating a joint strategic command structure. Renault raised its stake in Nissan from 36.8% to 44.4%. At the same time Nissan 1972 The Renault 5, which remains one of the Group’s best-selling took a 15% ownership interest in Renault. Coinciding with the models ever, was launched in 1972. strengthening of the Alliance, the French government reduced its holding in Renault to 25.9%. The government’s ownership interest was then further reduced to 15.7% by selling shares 1980 Through to the mid-1980s, Renault followed a strategy of diversification in the industrial, financial and service sectors, both to company employees and on the market. while at the same time growing its industrial and commercial activities internationally. But in 1984, the company ran into 2003 2003 was the year of Mégane II, with five new body styles financial difficulties. As a result, it concentrated on restructuring following on from the two vehicles launched in 2002. With Scénic II, and refocusing on core activities, and returned to profit Grand Scénic (unveiled in 2003 and launched early in 2004), in 1987. Mégane Coupé-Cabriolet, Mégane sedan and Mégane station wagon, a total of seven models were launched in 17 months. Mégane II was the best-selling model in Europe in 2003. 1990 In 1990, Renault became a limited company once again. In the same year, it signed an agreement for close cooperation 2004 was marked by two major product launches: Modus and with the Volvo group. And in 1991 the two groups linked their 2004 automobile and commercial vehicle businesses via cross- Logan. Modus is the first Renault-badged vehicle built on the B shareholdings. This arrangement was unwound after plans to platform shared with Nissan. Modus enhances Renault’s entry- merge the two groups were shelved in late 1993. level range by drawing on the Group’s know-how in minivans. It is the first vehicle in its class to score five stars in Euro NCAP 1994 One year later, the French government opened Renault to crash tests. Logan, developed by Renault and manufactured outside capital, a first step towards privatization, which took and marketed by Dacia, offers excellent value for money. Ever place in July 1996. since its was launched, Logan has been highly popular, both on its domestic market, Romania, and on export markets. The From the Type A Voiturette, created by Louis Renault in 1898, 1998 car will spearhead Renault’s international expansion in the Renault has been the source of many ground-breaking concepts years ahead. in automotive history: the 4 CV in 1946; the Renault 4 in 1961; the Renault 16, with its rear hatch and modular interior, in 1965; the Renault 5 with its polyester bumpers in 1972; turbo-powered vehicles starting in 1980; Espace in 1984; Twingo in 1993; and Mégane Scénic in 1996 are just some of the models that have contributed to the company’s tradition of innovation. 4 REGISTRATION DOCUMENT 2004 - RENAULT RENAULT GROUP STRATEGY ▲ 1 1.1 Presentation of Renault and the Group 1.1.2 Renault shareholders on December 31, 2004 ♦ Total share capital 3.3% Employees 15% Nissan * Individual shareholders 3.8% Total share 62.2% 5% Treasury stock capital (%) Public 15.7% * Institutional - France: 34.4% French State investors - North America: 34.5% 57.2% - UK: 16.8% - Rest of Europe: 11% - Rest of the world: 3.3% Voting rights 4.1% Employees 19.3% French State Voting rights 76.6% (%) Public * According to a TPI survey conducted on December 31, 2004. 2004 ANNUAL REPORT - RENAULT 5 ♦ Global Reporting Initiative (GRI) Directives. ▲ 1 RENAULT GROUP STRATEGY 1.1 Presentation of Renault and the Group 1.1.3 Five-year consolidated figures ♦ (Published figures)(1) 2004 2003 2002 2001 2000 € million Revenues ♦ 40,715 37,525 36,336 36,351 40,175 Operating margin 2,418 1,402 1,483 473 2,022 Share in Nissan Motor net income 2,199 1,705 1,335 497 56 Renault net income 3,551 2,480 1,956 1,051 1,080 Earnings per share (€) 13.35 9.32 7.53 4.38 4.5 Capital 1,086 1,086 1,086 923 914 Shareholders’ equity 16,060 13,591 11,828 10,051 9,652 Total balance sheet 60,942 58,291 53,228 50,129 51,975 Dividends (€) 1.80 1.40 1.15 0.92 0.91 Cash flow 4,808 3,560 3,578 1,688 3,412 Net financial indebtedness 541 1,748 2,495 3,927 4,793 Total staff at December 31 130,573 130,740 132,351 140,417 166,114 (1) This information is for reference only and is not always directly comparable year-on-year, since it may include changes in scope and/or changes in accounting practices (e.g.