Not True: "Nissan-Renault To Take Control Of Russia's AvtoVaz"
Rumors of Renault and Nissan taking over Russia’s AvtoVaz have been around for a while. We have a new one! The Nikkei [sub] picked up indications that Nissan and Renault will take a majority in AvtoVaz, Russia’s largest automaker. Except that The Nikkei doesn’t report it as a rumor. The headline “Nissan-Renault To Take Control Of Russia’s AvtoVaz” sounds quite definite. Sadly, it is not true.
In 2009, Renault had taken an interest in the Russian carmaker. The interest grew to slightly more than 25 percent. That didn’t take much money, but lots of guts, because AutoVaz was as good as dead at the time. Now, Russia’s car market is booming again. The Nikkei expects Nissan to pay around $1 billion for another 25 percent of AvtoVaz’s shares, bought from AvtoVaz shareholders Russian Technologies Corp., investment bank Troika Dialog and others. Combined, the Nissan-Renault alliance will own a controlling stake in AvtoVaz when the deal closes.
The Nikkei already hails the deal as creating “the world’s third-biggest automobile group, as their combined sales in 2010 came to 7.23 million units, beating Volkswagen AG.” The math may be right, but the logic is lacking.
- First, 2010 is over. One doesn’t get last year’s credit for this year’s M&A.
- Second, Carlos Ghosn and his spokespeople are always quick to stress that there is a Renault-Nissan Alliance, but that there is no Renault-Nissan company. Both are joined via cross shareholdings, and both have the same boss, Carlos Ghosn. But otherwise, they are separate. Technically, AvtoVaz will be owned by two car companies, Renault and Nissan.
- Third, Nissan and Renault always reported their sales separately. On the 2009 OICA list (the new one is not out yet), Nissan ranks #8 and Renault ranks On the TTAC Top Ten of 2010, Renault ranks 10th and Nissan ranks 6th. Which came close, but wasn’t enough to unseat Volkswagen from its #3 position, if Nissan and Renault would consolidate their numbers. Which they don’t.
- Fourth, the deal is not at all as cooked as The Nikkei tries to make it appear.
Reuters, which has a sharp team of auto writers in Tokyo, says that the deal is far from final, and that negotiations “are likely to take a few more months.” Reuters’ sources say there is no deal ready to sign.
My sources give me the impression that Reuters’ sources are much higher qualified than those of The Nikkei.
The Nikkei jumped the gun again. It is understandable that the Nikkei wants to see one of theirs on the podium. But as a financial paper, The Nikkei should know the fine nuances between an alliance and a merger. The Nikkei should also know when someone wants to pump a stock.
Nissan’s stock closed down two percent today, in line with other Japanese automakers. The AvtoVaz stock jumped close to 10 percent today, fuelled by the rumor. Someone made a lot of money by feeding the Nikkei what the Nikkei eagerly eats up.
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Whether Nissan-Renault would be third place, or how we calculate Nissan and Renault sales figures in the largely irrelevant game of OICA global automotive ranking is inconsequential. Crucially, Nissan and Renault are run as a single entity under the leadership of Ghosn, though financially they may be separate companies. The fact that Nissan is follows Renault into the Avtovaz should be an indication of this. Renault-Nissan have obvious plans for the company. The bigger question is if this deal is actually going to happen or not. We'll see if Reuters or Nikkei is right, but I'll tell you from experience that deals with Russian business tend to be highly unpredictable.
"Sebastian Vettel drives an Infiniti which was previous a Renault." Not exactly. He drives a Red Bull powered by a Renault engine and sponsored by Infiniti. Formula 1 is very picky at what you can call the chassis, the engine or how you can change it once it was approved. You need unanimous approval of the other teams, and you lose all the money you were entitled from your results under the previous name. That's why last year's Sauber was called a BMW all season long even if BMW had nothing to do with the team anymore since it bailed out from F1 the previous winter (and that gave us an incongruous BMW powered by a Ferrari engine!) and also why, to Dany Bahar's annoyance, the ex-Renault F1 team, now owned by a Luxembourg investment firm and sponsored big time by Lotus is still called a Renault on all the timesheets and by the commentators while there is another car on the grid called a Lotus which has nothing to do with Group Lotus. But that's another story. Your point, however is very valid. Ghosn is pushing hard for integration and it has worked well so far, much better than any other maker alliance/merger at that level. Being French and living in Japan, it's always interesting to see the difference in perception of the Renault-Nissan affairs and Carlos Ghosn. Basically, the French are permanently offended that Nissan, seen as a colony since Renault took control when it was on dire straits, would get such independence, better results and most of Ghosn's attention, while in Japan everybody ignores Renault. Selling 12 cars per year or so in Japan does not help, obviously. The French, including the government who is also the largest shareholder of Renault, are paranoid that Ghosn will pull a trick and reshuffle the financial structure of the whole group so that suddenly Nissan will be on top. They get quite nervous then at every hint of a move such as this AvtoVaz thing where they don't understand why the name of Nissan should be mentioned at all. That's fun.