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Renault's 20-year marriage with Nissan may be in trouble

Jun 11 2019 07:46
Ma Jie and Ania Nussbaum, Bloomberg

Stung by the shock arrest of their leader, and now a failed deal to create one of the world’s biggest automakers, decades-long partners Renault and Nissan may have finally reached boiling point in their relationship.

The implosion of Renault’s merger plans with Fiat Chrysler has brought the French and Japanese automakers’ tensions out into the open, with Nissan’s reluctance to endorse the deal, said to be partially responsible for its failure.

In response, Renault chairperson Jean-Dominique Senard sent a letter threatening to block the Yokohama-based company’s plans to overhaul its governance structure. Nissan confirmed that it had received the letter, calling "Renault’s new stance on this matter most regrettable."

The corporate-governance reform ''was discussed thoroughly by Nissan’s board and approved by all board members, including Renault’s own nominees,'' Nissan CEO Hiroto Saikawa said in the company’s statement.

''Such a stance runs counter to the company’s efforts to improve its corporate governance.''

Nissan also seized on comments made by the finance minister of France, Renault’s biggest shareholder, that his government is willing to reduce its stake to strengthen the alliance. Nissan, which has long chafed against French influence, would prefer a full exit by the government, people familiar with Nissan’s thinking said, asking not to be identified because the information isn’t public.

''Overall it is a mess, and just makes a tricky situation worse,'' said Janet Lewis, an analyst at Macquarie Capital in Tokyo. ''Senard’s threat to abstain on the corporate governance reform is very negative for the alliance. He is fast losing any trust Nissan management may have had for a collaborative relationship. Playing hardball doesn’t typically work in Japan, so he will find it very hard to achieve anything going forward.''

Senard, who was brought in by the French government to smooth the relationship with Nissan, has instead pressed Nissan for a merger it didn’t want, then pursued the mega-deal with Fiat Chrysler.

In a letter to Nissan, Senard said the French automaker is seeking better representation within Nissan’s plan to set up three committees on nominations, remuneration and auditing, said the person, who cautioned that Renault hasn’t made a final decision on its vote and was still in negotiations.

While Renault understands Nissan’s desire to improve its governance, the so-called three board level committees system ''should not serve as a tool directed or used against Nissan’s largest shareholder,'' the letter said. Nissan shareholders meet on June 25 to vote on the structure.

The latest crisis erupted a week ago when Renault’s merger talks with Fiat fell apart after Nissan abstained two of its board votes for further negotiation, prompting the French state to pause discussions. Finance Minister Bruno Le Maire, in Japan to attend G-20 meetings, sought to patch up tensions but ended up reminding the Japanese company of his government’s outsized influence over the automakers with 15% stake in Renault, which in turn owns 43% of Nissan.

The Japanese automaker has long been uneasy over the arrangement, which was strained even further following the November arrest of Carlos Ghosn, the architect and former chairman of the alliance. Amid the instability, Renault has been pushing for closer ties, while Nissan has sought more autonomy. The two need each other more than ever, given the massive investments needed for electric vehicles and self-driving technology.

Over the past decade, Renault and Nissan have reached €5.6bn in synergies, producing a combined 10.6 million vehicles last year. A separation could result in years of disarray.

Renault and Nissan cooperate on engineering, manufacturing, supply chain management, purchasing and human resources.

''It’s a difficult relationship, Nissan and Renault,'' said Koji Endo, an analyst at SBI Securities. ''They may want to divorce.''

Le Maire’s suggestion to reduce France’s stake in Renault, if such a move would strengthen the alliance, was dismissed by Nissan, which has also sought a significant reduction in Renault’s stake in itself. Le Maire added the following day that any sale would be a long-term objective, giving near-term priority to ''reinforcing the Renault-Nissan alliance.''

Asked about Le Maire’s comments, Saikawa said he shares the minister’s view that the alliance is important.

The French government played a major role in the Renault-Fiat split, having sought to postpone talks until after Le Maire’s trip to Japan, so as to seek explicit support from Nissan before going forward. The demand caused the ire of Fiat, which withdrew its offer Thursday, months after negotiations first started.

Even so, it appears that the chairmen of both European automakers looking for ways to revive the merger plan and gain Nissan Motor’s approval, Reuters reported on Monday.

Renault is now left with its troubled alliance with Nissan and the third partner, Mitsubishi. The two companies already share platforms and technologies and continue working together despite the tensions that have flared up since the arrest of Ghosn, their former leader whose stature helped keep tensions below the surface. Ghosn, who was jailed twice starting in November on allegations of financial wrongdoing, denies the charges. He is out on bail awaiting trial in Japan.

Le Maire is set to meet Japan Finance Minister Taro Aso and Economy Minister Hiroshige Seko Monday. Le Maire said Sunday that the government’s responsibility was to secure jobs as well as industrial and research sites. The Japanese government has also played its part - including by intervening to defend Nissan’s independence from Renault last year.

''Nationalism is rising, and the globalists are losing,'' Max Warburton, an analyst at Sanford C. Bernstein & Co. ''Perhaps this deal was doomed from the start. We live in an era of de-globalisation and heightened anxieties about national and regional identities. This applies to corporations as well as politicians and individuals.''

renault  |  nissan  |  companies  |  industrial


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