Pfffft: The Air Escapes From The Big Nissan-Renault-AvtoVaz Takeover Story

by Bertel Schmitt

Published: June 17th, 2011

Yesterday, The Nikkei was all worked up about a takeover of Russia’s largest automaker AvtoVaz by the Renault-Nissan Alliance. The Nikkei became so excited that it forgot simple logic. More on that here. The Nikkei had it on not so good authority that Nissan would soon buy 25 percent of the Russians, and together with Renault’s 25 percent and change, Japan and France would finally achieve what had been tried before: Rule Russia. We had our doubts.

Do you hear the big hissing sound? That’s the lukewarm air coming out of the story. Today, Financial Times Germany, along with what looks like all of the German press, writes that Nissan plans to buy a whopping 4 percent of AvtoVaz. Yes, four. Even that is not cast in stone. Sergey Chemezov, head of the sprawling Russian government holding Rostechnologii, told the Russian news service Interfax that Nissan intends to buy four percent of AvtoVaz from Rostechnologii. Rostechnologii will reduce its holdings down to the blocking minority of 25 percent. Depending on the by-laws of a corporation, a blocking minority has veto power.

Why the fascination of the Germans with Chemezov? He’s a colorful man. He worked as an undercover agent in Dresden, East Germany, while Vladimir Putin was the KGB rezident there. His official resume glosses over this tidbit. Was Chemezov telling theb truth? Did Interfax write it as it was said? We’ll never know.

There are other parties in Russia that hold AvtoVaz stock. They may or may not be interested in selling. But currently, that’s all there is to the story.

#AvtoVAZ #BertelSchmitt #Nissan #Renault

Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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3 comments

L'avventura on Jun 18, 2011

Bertel, your off-base criticism for the Nikkei is a bit perplexing considering how much you regurgitate their stories on TTAC. Last time you got worked up by Nikkei calling the Renault-Nissan 'third' place in sales. You've probably noticed since that its been repeated by pretty much every other publication. Also, if you've followed the Renault-Avtovaz story you would know that Nissan taking 25% actually dates back to a WSJ story back in November of last year, and was agreed upon by Putin himself. http://online.wsj.com/article/SB10001424052748704462704575590600772606686.html I would agree that Russian business tends to be unpredictable and that situation is fluid, but you're missing the real story here. The real story is the deal itself. As we've seen with Ghosn management style, taking a controlling stake is crucial for Renault-Nissan's investment in the Russian automotive market to go forward. We've seen this when Renault took Nissan, Dacia, and Samsung. Ghosn management style is not about acquiescence. Taking any smaller stake less than control would mean that deal will have severe repercussion in Renault-Nissan's Russian investment. The risk of managerial bickering with Russian counterparts weighs heavily without a controlling stake. There is a lot more going on here than how Nikkei, or anyone else, is reporting this...

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- Th009 on Jun 18, 2011
  
  If you were to add the two separate companies together, they would have come in fourth in sales in 2010 (after Toyota, GM and VW), not third. And in 2011 it would likely be sixth as Renault sales are plummeting and Nissan was hurt by the tsunami, while Ford and Hyundai are growing strongly. And "taking any smaller stake less than control" ... how about that Nissan stake? While Ghosn may be the CEO, the Nissan board of directors can change direction at any time, Ghosn or no Ghosn, since Renault only holds a minority stake.
  
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- L'avventura on Jun 18, 2011
  
  @th009 If you followed Bertel's previous rant, it had Avtovaz's sales tallied into it, which made them third. Also, the reference was specifically to Renault-Nissan alliance and combined sales of the Renault-Nissan alliance as a whole, which made no room for confusion, but Bertel had an issue with this. Also, previous year sales are often cited by the press, Toyota is still frequently cited as the "world's largest" when we all know they won't be this year, as GM was previous to before Toyota took the crown. These sort of simplifications are common so that the reader can digest information more easily, this is not lack of journalistic integrity. As far as Nissan and Renault, not only is Ghosn the CEO of both companies, the controlling stake of the Nissan board of directors are made of Renault representatives. Renault has majority voting power in the Nissan BOD. Renault's stake in Nissan is actually worth more than the market cap of Renault as a whole. This is the design of a hierarchical cross-share holding company like what the Renault-Nissan alliance is. If Nissan takes a 25% stake in Avtovaz it means that Renault will have control due to that hierarchical top-down structure. If Nissan takes a 4% stake it means that the current Renault-Avtovaz licence will likely not evolve beyond what its currently at, meaning Avtovaz will need to pay for licenses of Renault/Nissan platforms and technologies and stop at shared purchasing from suppliers. Keep in mind, the whole 50% purchasing of Avtovaz stock by Renault-Nissan was announced in the $2B investment plan which Russia demanded by foreign carmakers and Renault-Nissan provided. This has been floating around since last year, and has been reported on for weeks before Nikkei's story. This is their official plan. http://uk.reuters.com/article/2011/06/03/nissan-russia-idUKL3E7H30AE20110603.
  
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