Nissan-Renault Relationship Has Not Improved, Despite Assurances to the Contrary

If Nissan and Renault were a living, breathing couple, they’d be the duo all of your other friends whisper about. They’d be the couple with the big house and seemingly successful children that everyone knows fights bitterly in the evenings — screaming at each other before retiring to their separate bedrooms. The relationship, while healthy in terms of financial productivity, has grown toxic on the corporate end of things.

Less than one month after Renault’s new chairman claimed a merger would be out of the question, the French automaker is once again pushing for integration. Nissan is having none of it and plans to reject the proposal outright, according to reports from Nikkei.

France’s government, which holds a 15-percent stake in Renault, has encouraged the automaker to solidify its ties with the Japanese company for years. Despite being largely dependent upon Nissan for new product and strong global sales, Renault owns 43.3 percent of Nissan, while the Japanese firm only holds a 15-percent stake in the French carmaker. It’s clearly in Renault’s best interest to lock Nissan into a legitimate marriage — a trick it has yet to pull off.

Former Alliance head Carlos Ghosn, who was indicted for a fourth time by Japanese prosecutors on Monday, has claimed his incarceration is a direct result of a corporate power struggle with Nissan’s top brass. While the legitimacy of those claims can be debated, there was clearly fallout stemming from his drive to see the pair enter into an “irreversible” partnership. Nissan wants voting rights within the Alliance, something it currently lacks, and has grown increasingly vocal about the issue.

From Nikkei:

For its part, Nissan’s management feels the company has not been treated as Renault’s equal under the existing capital ties. It fears a merger or some form of integration under a holding company would make that inequality permanent, the sources said. [Jean-Dominique] Senard, who took over from Ghosn in March, ruled out talk of a merger in an interview with Nikkei soon after becoming chairman.

“If I were to talk about a merger, it would be to talk about the intelligent merging of our cultures to make the alliance very efficient. All other ideas would not be relevant,” he said. In a separate interview the same month, he also said the companies were not discussing reworking the capital relationship.

Both sides have stressed that the priority since Ghosn’s departure is to repair their alliance, which is the world’s second bigger car producer. But sources said this could now be more difficult.

Nissan’s continued resistance to the concept of a merger highlights the company’s longstanding suspicion of the French government’s intentions. Nissan has repeatedly pushed for an equal capital relationship between the two companies, but has been reluctant to increase its own stake in Renault due to concerns that it could regarded as an aggressive act by the French manufacturer.

However, depending on what you believe happened prior to Ghosn’s initial arrest and how guilty he is, Nissan hasn’t played softball. The company clearly seemed to think that, with him gone, merger talks would evaporate (at least for a while) and it could focus on improving corporate efficiencies without fighting against integration proposals.

Despite Renault being all smiles about the future last month, Nissan was wrong. The French government already said it wanted to see management union under a holding company structure last January. And Renault’s latest merger proposal appeared on Nissan’s doorstep within the past two weeks, according to reports.

At the end of the day, France wants to keep Nissan around to help pad Renault’s global sales and share the cost of developing advanced technologies. Over half of the Renault-Nissan-Mitsubishi Alliance’s annual volume can be attributed to Nissan; the company also managed to outspend Renault on capital investments by $1 billion in 2018.

Japan is having difficulty seeing what’s to be gained on its end. Meanwhile, at-home investors have already expressed concerns over both the possibility of a merger and Renault’s role in the company’s future — Nissan even had an emergency meeting about it. The country’s Ministry of Economy, Trade and Industry was also said to have communicated directly with the French government to ask it to nix an earlier integration proposal against Nissan’s wishes.

“As you could see, the draft is going a little too far even in our view, when the French state is staying quiet,” Nissan’s head of government affairs, Hitoshi Kawaguchi, wrote in a May 2018 message to the Ministry about a memo it sent to France asking to respect the automaker’s independence. “Though support by the Japanese government is appreciated, it is a private company matter at the end of the day.”

What a mess. At this point, it’s hard imagine what the best path forward for either automaker. Renault clearly doesn’t want to lose access to Nissan’s strength, but trying to hold onto it is only making the company less eager to maintain the relationship.

[Image: Nissan]