Renault shares plunged Monday while Kering soared as investors digested reports that the French carmaker's chief executive, Luca de Meo, was poised to become head of the French luxury goods group that owns Gucci.

The announcement late on Sunday that de Meo would leave Renault in mid-July to take on new challenges outside the automotive sector and his mooted switch to Kering sent the latter's shares up nearly 10%, on track for the biggest one-day percentage gain since March 2020.

PINAULT TO BECOME CHAIRMAN

Renault, meanwhile, tumbled by about 7% for the biggest decline since last July on the departure of the man who led the carmaker's turnaround and overhauled its two-decade strategic alliance with Nissan.

The Italian is now set to replace Kering CEO Francois-Henri Pinault, whose family controls the debt-laden luxury conglomerate and who would remain as chairman, five sources told Reuters, confirming a report in Le Figaro newspaper.

"I will soon embark on a new transformation challenge in a completely different industry; one that will require me to learn and grow once again," de Meo said in a note to Renault staff seen by Reuters.

"Luca de Meo is going to Kering," one of the sources told Reuters. It could be confirmed as early as Monday evening after the market close, another source said.

Kering declined to comment on the reports.

"Hiring someone from outside the luxury sector might be seen as risky, but his profile appears well-suited to lead Kering," Kepler Cheuvreux analysts said. "His turnaround capabilities, product-focused leadership and extensive marketing experience would be particularly valuable."

TURNAROUND NEEDS

De Meo's unexpected departure is the second top-level exit from a European carmaker in six months after Carlos Tavares resigned from Stellantis, with the sector reeling from U.S. President Donald Trump's trade tariffs and fierce competition from Chinese rivals.

A Renault spokesperson said that de Meo's departure would not affect the company's coming mid-term strategic plan, though JP Morgan analysts said they considered it a setback for the plan.

De Meo joined Renault from Volkswagen in 2020, a year in which it registered record losses after a pandemic-induced sales slump.

He launched wide-ranging cost cuts that reduced headcount and production capacity worldwide, making Renault a smaller but nimbler company. He also oversaw the reshaping of its often difficult relationship with Nissan.

De Meo's track record suggests he could be a good fit for Kering, some analysts said.

Under Pinault's leadership, the group became a pure luxury player and enjoyed years of spectacular growth that was driven largely by Gucci. Since the pandemic, however, Kering has struggled to reinvigorate the brand.

It has also taken on more than 10 billion euros ($11.6 billion) in debt, exposing it to the risk of another credit rating downgrade.

($1 = 0.8636 euros)