More Drama: Renault to Block Nissan's Corporate Reform
Nissan and Renault’s strained relationship is well documented at this point. And yet the scribes keeping tabs on the matter must now dip their quills in fresh ink, as a new chapter is ready to be written. Following the arrest of Carlos Ghosn, industrial scandals, a subpar earnings report, and more headaches, Nissan intends to adjust its corporate structure while passing some internal reforms.
However, Renault Chairman Jean-Dominique Senard recently issued a letter to the automaker saying the company would abstain from voting on the issue. As Nissan’s adoption of the reform requires two-thirds approval, Renault could easily block the plan with its sizable stake in the company. Nissan politely calls the automaker’s stance “most regrettable,” but execs in Yokohama must be seething.
On the surface, this looks like payback for Nissan not supporting the French automaker’s proposed merger with Fiat Chrysler. While Nissan did abstain from voting on the plan and seemed to have little say in talks, FCA ultimately said it was the French government that stymied the deal.
According to Reuters, Senard’s letter was primarily concerned with the breakdown of representation within new boards. “Renault’s rights as 43.4 [percent] shareholder of Nissan need to be fully recognized and, at a minimum, one or two directors proposed by Renault should be members of each of the three committees,” the document read. “As currently proposed, this does not seem to be the case.”
From Reuters:
A Renault source said Senard’s letter was motivated by concern about Renault’s under-representation on the new Nissan board committees being introduced following the arrest of Ghosn, who is now awaiting trial and denies the financial misconduct charges against him.
“It’s not a final abstention, and Renault’s position can still change,” the source said. “As things stand, Renault has not been assured of appropriate committee representation as Nissan’s main shareholder.”
Renault had yet to receive specific details on the proposed composition of each of the committees, another source with knowledge of the issue told Reuters.
A Nissan source said Renault CEO Thierry Bollore had expressed a desire to sit on new Nissan committees to oversee executive nominations and compensation, and a planned corporate governance auditing committee.
“Nissan has received a letter from Renault indicating intention to abstain from voting,” Nissan said in a statement, “Nissan finds Renault’s new stance on this matter most regrettable, as such a stance runs counter to the company’s efforts to improve its corporate governance.”
Earlier this year, the Japanese automaker appointed a group from outside the company to advise on the formation of the three committees. Under the current proposal, Renault directors would be eligible to serve on the nominations committee while being prohibited from joining the compensation and audit boards. Having sought additional autonomy for years, Nissan has been consistently opposed to a merger with Renault on those grounds. Nissan CEO Hiroto Saikawa said the companies would have to confront the issue eventually.
“We are preparing for the shareholder meeting and will discuss necessary issues at the appropriate time. If there are differences of opinion, then I’d like for those to be discussed,” he told the Japanese media.
Meanwhile, Renault and FCA are hunting for ways to salvage their failed merger plan. According to Reuters sources, Nissan is expected to pressure Renault to significantly reduce its stake in the company.
[Image: Anton Watman/Shutterstock]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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This dysfunctional family won't stay together much longer.
Other reports I have read today said Senard was in favor of the changes at Nissan, before he opposed them. This 180 by Senard is another datapoint in the developing theory that the intention from the start of the merger proposal was to break the alliance and Renault divesting it's interest in Nissan. Divesting Nissan is the only way a Renault/FCA merger would pass US anti-trust scrutiny. It was reported last week that the investment bankers putting the deal together intended from the start to essentially railroad Nissan. It was the French government's insistence that Nissan, as a Renault stakeholder, have a say in the merger that precipitated FCA breaking off negotiations. It is routine for investment bankers to arrange a fat payday for the top honchos of companies, to assure their cooperation in making a merger happen, so the bankers can have an even fatter payday. In this deal, FCA shareholders were to receive a fat special dividend, an incentive aimed directly at John Elkann and the other beneficiaries of Exor, which holds close to 30% of FCA stock, and 42% of the voting rights. It looks like Senard is also in line for a multi-million payout, if the merger can be made to happen, as he has changed his mind and is trying to throw more sand into the alliance. imho, the huge synergies that are being claimed for this merger only exist in the fevered minds of the bankers. The synergies are between Nissan and Renault as they both operate in the same market segments. There are near zero synergies between Renault and FCA. FCA's most profitable products are so large and fuel hungry they are only relevant in North America. If the alliance is successfully broken, what will happen after the merger will be that Renault will be starved of product, just as Fiat is being starved, while money is bled out of Renault to fund pickup and large SUV development in the US. Eventually, due to falling volumes, Renault will fall into the red and FCA will be looking for a way to unload it. I figure the French government will pressure PSA to pick up the pieces, as Peugeot did with Citroen and Simca, to save French jobs.