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Ghosn’s Escape Fuels French Concern About Renault-Nissan Ties

Ghosn’s Escape Fuels French Concern About Renault-Nissan Ties

(Bloomberg) --

Carlos Ghosn’s escape from Japan risks distracting Renault SA from its efforts to repair relations with ally Nissan Motor Co., a top French official said, underlining the potential corporate fallout from the former auto titan’s daring flight to Lebanon.

His new-found freedom raises concern the patching up of the Franco-Japanese partnership will be delayed, the Paris-based official said, asking not to be identified under government rules. France is Renault’s most powerful shareholder.

Ghosn, who led both companies, looks set to blast Nissan for its role in his arrest when he speaks to reporters at a press conference in Beirut tomorrow. His pledge to “speak freely” has fueled concern his remarks could rekindle the mutual suspicion that has plagued relations between the carmakers.

Making the two-decade-old automotive alliance work is crucial for both companies in the face of trade wars and an expensive shift toward electric and self-driving vehicles. Carmakers are increasingly pooling resources to shoulder investments. Just last month, Renault’s French rival PSA Group agreed to combine with Fiat Chrysler Automobiles NV to create a global heavyweight.

Nissan on Tuesday went on the attack against Ghosn, saying its internal investigation found “incontrovertible evidence of various acts of misconduct,” and that it will take “appropriate legal action” against the former executive for any harm caused to the company. A representative for Nissan declined to comment beyond the statement. Renault declined to comment.

Ghosn, who was awaiting trial on charges of financial crimes and breach of trust before he fled Japan last week, has said he was escaping a “rigged” justice system.

His ouster from Nissan and resignation from Renault following his November 2018 arrest worsened a climate of mistrust that led to a near collapse in the working relationship between the companies. Their partnership, which also includes Mitsubishi Motors Corp., is the world’s biggest carmaking alliance.

The infighting has taken its toll on Renault and Nissan’s stock performance. The French carmaker is trading near a seven-year low, while the Japanese manufacturer is at levels not seen in a decade. An industrywide sales slump and Renault’s failure in its own attempt to merge with Fiat Chrysler has also weighed on the stocks.

Ghosn’s Escape Fuels French Concern About Renault-Nissan Ties

At the root of the tensions between Nissan and Renault has been a lopsided ownership structure, with Renault holding 43% of the Yokohama-based carmaker and Nissan owning just 15% of Renault. Given its bigger size and superior earnings performance in recent years, Nissan has sought more sway in the alliance, including a reduction in Renault’s stake.

Now, both automakers are suffering from a drop in car sales in key markets, including China and Europe, as well as pressure to spend on new technologies. In a blow to Renault, Nissan has withdrawn its dividend outlook after slashing its profit and sales forecasts for the fiscal year ending in March.

Renault has hinted at a potential reduction in its own payout following a profit warning and a cut to the global auto market outlook. Goldman Sachs Group Inc. and JPMorgan Chase & Co. this week cut price targets on Renault, saying spending on technology is likely to hurt 2020 earnings.

Ghosn has accused Nissan of collaborating with Japanese authorities in a “coup” to remove him in order to prevent a full-blown merger with Renault. At the press conference, he may choose to reassert this charge, which has raised questions about Nissan’s governance, according to Jean-Louis Sempe, a Paris-based analyst at Invest Securities.

Following Ghosn’s resignation as Renault CEO nearly a year ago, the French government worked behind the scenes to help repair relations with Nissan, using diplomatic channels and handing Chairman Jean-Dominique Senard the responsibility to get the alliance back on track.

To restore trust, both companies have since made changes in top management. Nissan replaced its CEO and Renault has embarked on its own chief executive search after ousting Thierry Bollore, a former Ghosn protege.

“Renault needs to come up with a plan for cost-savings through the alliance,” Sempe said. “The new CEO will have to get it working again.”

French Finance Minister Bruno Le Maire on Tuesday said the Renault-Nissan alliance is doing well. The previous day he stated that Ghosn should face charges against him like anyone else would have to do in a similar situation, adding that French authorities are still investigating a complaint brought by Renault. Ghosn is a citizen of Lebanon, France and Brazil.

--With assistance from Kae Inoue.

To contact the reporters on this story: Tara Patel in Paris at tpatel2@bloomberg.net;Geraldine Amiel in Paris at gamiel@bloomberg.net

To contact the editors responsible for this story: Brian Bremner at bbremner@bloomberg.net, Frank Connelly, Kenneth Wong

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