Ghosn Exit Sets Stage for Showdown Over Renault-Nissan Future
(Bloomberg) -- The sudden downfall of Carlos Ghosn looks set to unleash a power struggle between Renault SA and Nissan Motor Co. over the alliance he oversaw for two decades.
While both sides say they’re committed to the partnership, they’re already prepping for a battle over control of the world’s biggest car alliance, people familiar with their discussions said. And with the French and Japanese governments also keen to defend their own interests, it could devolve into one of the toughest corporate slugfests of recent times.
Ghosn’s arrest in Japan for alleged financial misconduct opens the door for Nissan to try to rebalance the alliance, while Renault is bracing to resist any effort to undermine its position, said the people. At the outset, Renault was the stronger partner, but over the years circumstances have changed: Nissan now sells a third more cars annually and earns more profit.
“The crisis has just started for the alliance,” said Kenneth Courtis, chairman of Starfort Investment Holdings, an investment, private equity and commodity group. “All the problematic stuff is now going to come to the surface.”
This story is based on discussions with more than half a dozen individuals close to the companies, who asked not to be identified discussing private matters. A representative from Renault declined to comment, while a Nissan official didn’t immediately return a call seeking comment.
Nissan’s board ousted Ghosn as chairman on Thursday, three days after his arrest, a stunning fall from grace for an executive widely credited with rescuing the carmaker from collapse in 1999. With Ghosn gone, Chief Executive Officer Hiroto Saikawa is already plotting a review of the alliance to make it more equitable for the Japanese carmaker, people familiar with the plans said. Nissan has also long been irked by French government meddling in the alliance, one person said.
The French company will resist any sudden moves to reshape the relationship, other people familiar said. Possible scenarios include bringing in another partner such as Germany’s Daimler AG to strengthen the European arm of the alliance, two people said, though no such plans are currently under discussion. Daimler and Renault-Nissan started working together eight years ago on small cars and delivery vans. The three-way cooperation is underpinned by a cross-shareholding of 3.1 percent.
France could also tap an executive with credibility on both sides, such as Toyota Motor Corp.’s Executive Vice President Didier Leroy, to act as an intermediary, one person said. The Frenchman and former Renault executive, 60, is a well-regarded business figure in Japan. Leroy declined to comment.
An alliance meeting is planned for next week in Amsterdam, that may include Daimler, said a person with knowledge of the matter.
Renault, with the French state as its biggest shareholder, has a 43 percent voting stake in Nissan, which in turn owns just 15 percent of Renault, with no voting rights. That imbalance has caused simmering resentment at Nissan for years.
Lately, the structure has become increasingly controversial in Japan due to Nissan’s improved performance. Nissan sold roughly 5.8 million cars last year -- compared with just 3.7 million for Renault -- and provides links to China, where Renault only has a small presence, and the U.S., where the French carmaker is absent.
According to Japanese corporate law, Renault’s voting rights could be canceled if Nissan raises its shareholding to more than 25 percent in the French carmaker. Under French rules, if Renault lowered its stake in Nissan below 40 percent, then it will help the Japanese carmaker get voting rights in the French company.
Prior to his arrest this week, Ghosn was busy working on plans to make the alliance “permanent,” possibly through a merger, as reported by Bloomberg in March. That push was facing resistance from within Nissan, including from Saikawa, his former protege.
Both sides agree that the future of the partnership is more important than the fate of Ghosn, who remains in the same prison as the death-row inmates from the Japanese cult that perpetrated the 1995 Tokyo subway sarin attack, many of whom were executed just a few months ago. He hasn’t commented publicly since his arrest.
The allegations against him were of a precise and serious nature, a French government official close to President Emmanuel Macron later said. He also said the state is willing to hold long-term talks about adjusting the shareholder pact to address the tensions, but not now and certainly not until the current governance situation is cleared up. Renault replaced Ghosn as CEO on a temporary basis while awaiting more information.
Macron followed the spectacle around Ghosn’s arrest on Monday through the headlines, just like his finance minister and the officials in charge of the state’s stake in Renault, according to two officials with knowledge of the matter. The French head of state had been given no warning that trouble was brewing for the 64-year-old Ghosn, even though Renault employs almost 50,000 people in France.
Nissan may have been motivated to keep the French out of the loop by their recollections of a bruising power struggle in 2015 when Macron, as economy minister, boosted the government’s stake in Renault without warning Ghosn or the Japanese. That allowed France to thwart Nissan’s efforts to increase its influence at the French carmaker.
The conflict couldn’t come at a more perilous moment. The rollout of electric vehicles and a move toward autonomous driving are presenting long-term challenges and demanding enormous investment, making the manufacturing scale and R&D muscle provided by the alliance more important than ever. A separation of joint production, model development, engine sharing and parts purchasing could cause years of disarray.
Investors blindsided by Ghosn’s arrest for alleged financial misconduct and fearing a destructive corporate battle sold off both companies’ shares. Renault is down more than 6 percent over the past week, while Nissan has slid about 4 percent since the outbreak of the scandal. At $36 billion, Nissan’s market value is almost twice as large as Renault’s.
“All parties involved should be aware that the last thing Nissan and Renault need is an ongoing management and cultural spat which would ultimately lead to a dysfunctional Alliance and further fading competitiveness,” Arndt Ellinghorst, an analyst at Evercore ISI, wrote in a note to clients.
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