By on June 12, 2020

Renault finds itself reeling from pandemic-related shutdowns and industrial partnerships that proved more troublesome than helpful. Its alliance partner, Nissan, has been incredibly wary of any further integration with the French company — providing a major distraction within the alliance, even as the situation on the ground worsened. They’re now trying to reorganize the partnership while addressing the crippling financial situation they’ve both been confronted with.

Any talks of a merger (something Nissan clearly doesn’t want) have been suspended so the automakers can focus on reducing operating costs (layoffs, product reorganization, etc.). The duo also sought financial help to offset money lost back when we were all still collectively handling the pandemic in a super serious manner. While Nissan was interested in landing private loans, Renault hoped to get its aid via the French government. However, Chairman Jean-Dominique Senard made it clear that not all help will be welcomed, especially if it means nationalizing the company. 

According to Reuters, Renault believes any further investment by the French government would be a waste of everyone’s time. “I’ve said that it isn’t on the table,” Senard told a hearing in the lower house of the French parliament on Thursday. “I have nothing against the state, I’m just saying that it’s not useful to spend taxpayer money to invest it in a company which needs to find its own resources.”

That said, the automaker would still like to see a state-guaranteed loan totaling 5 billion euros ($5.6 billion USD) fall into its pocket to help it through this troubled time.

Renault owns 43.4 percent of Nissan’s shares, while Nissan owns 15 percent of Renault and lacks voting privileges. France also happens to own 15 percent of Renault and often has something to say whenever the firm decides to make major decisions. That hasn’t gone over well with Japanese investors and a sizable chunk of Nissan’s leadership, making it one of the biggest reasons why they oppose continued integration within the alliance. It also played a role in kiboshing the proposed merger with Fiat Chrysler.

Spooked by French politics and a palpably displeased Nissan, FCA turned away from the deal to make a new arrangement with Renault’s French rival, PSA Group.

[Image: TY Lim/Shutterstock]



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6 Comments on “Maintain Your Distance: Renault Sets Boundaries for the French Government...”

  • avatar

    So, “don’t insist on equity, just guarantee our debt instead”. Which translates as “we’re happy to share the downside potential with you, but not the upside opportunity”.

    To which the French government, as any prudent investor would, should remind Renault that “beggars can’t be choosers”.

    • 0 avatar

      France DOES shave the upside: a major industrial employer doesn’t go bankrupt, putting thousands out of work, and increasing the France’s unemployment expenses and reducing tax revenue.

      A loan guarantee doesn’t cost France anything, as long as the company can pay back the bankers. Chrysler got a guarantee and the big check they showed paying off the loan was made out to the banks that lent the money, not the government.

      The company has to have a plan to pay back the money, though. Chrysler had the K-car for a selling point, and it was the variations on it, especially the minivan, that put the company back in the black.

      The question France needs to ask Renault is, what have you got to pay the loan back?

  • avatar

    What is wrong with nationalization? Isn’t nationalization what progressive Europeans aspire to? It provides job security and overall stability and also taking advantage of government control of the market.

    • 0 avatar

      What’s wrong with nationalization is that the government and the corporation priority is quite different, and would definitely make you an unattractive business partner.

      In case of Renault, the French government was only interested in keeping French jobs profitability be damned. This meant Renault couldn’t lower its structural cost. This ended up putting the strain on Nissan, where most of the profit ended up as stockholder dividends to prop up Renault instead of being invested into future R&D.

      Now that Nissan is “used up” and without any rainy day funds, they don’t know what to do.

  • avatar
    Jeff S

    What’s wrong is that the Government bureaucrats get involved in the production of cars and that didn’t work out so well for British Leyland. For Nissan ever since Renault their products have gone down the tubes and their only hope for survival is severing themselves from Renault.

  • avatar

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