Renault-Nissan’s Loveless Marriage Will Survive This Rough Patch
Yugoslavia was a disparate collection of Slavic republics — Serbia, Bosnia, Montenegro and so on — with natural tribal enmities. In the decades after World War II, Tito managed hold it together, and keep the ethnic tensions suppressed. Once he died, however, the center could no longer hold, and Yugoslavia eventually split into seven smaller countries.
Carlos Ghosn, the former chairman of Nissan and chief executive (and chairman) of Renault — and the man who created the alliance in 1999 — is still very much with us, of course. But since mid-November, he’s been in a Japanese prison, accused by Nissan of a variety of financial misdeeds, even as Ghosn has vehemently protested his innocence. Ghosn’s efforts to convince a judge to let him out on bail have been summarily rejected, despite his offer to wear an ankle monitor and pay for his own security to ensure he wouldn’t flee Japan. It now seems unlikely he will get out of prison before his trial starts, which could be a year away.
Thus on Thursday, Ghosn succumbed to the inevitable, and resigned his Renault positions. Renault’s largest shareholder, the French government, was pushing for such a step because the company — despite finding no evidence of wrongdoing by Ghosn — couldn’t continue any longer with an imprisoned leader. The first order of business for the new chairman, Jean-Dominique Senard, according to France’s finance minister Bruno Le Maire, is “strengthening the alliance.”
But that will not be an easy task. Although Ghosn always made it seem like the alliance was a smooth-functioning organism, there were always tensions just under the surface. Nissan resented that Renault held a 43 percent stake in its shares, while it only had a 15 percent stake in Renault. It bridled at the French government’s involvement in the alliance. And Nissan executives particularly resented Ghosn’s my-way-or-the-highway management style. “There were always big cultural issues,” Keller told me.
One reason Ghosn was so successful reviving Nissan at the turn of the century is that he did things Japanese executives couldn’t do for cultural reasons. He shut down a factory and laid off workers. He sold off assets to pay down debt. He moved the company to a less expensive headquarters, and fired high-ranking executives he viewed as deadwood. None of these moves sat well with Nissan’s executives — and neither did his agitation for the kind of CEO compensation common in the U.S.
A second factor in the tensions between the companies was the changing global auto market. “In the early 2000s, they were not natural competitors,” Keller said. “Nissan had Asia and North America. Renault had Europe. Today, they are more likely to be competitors than not, fighting for sales in Latin America and Asia.”
The alliance began primarily as a way to help the struggling Nissan — and Ghosn was viewed in Japan as its savior once it was revived. Today, however, Nissan no longer needs Renault; it is the more profitable of the two companies, and although Nissan is, like every other auto company, having problems, Renault is in far worse shape. Whether or not Ghosn’s arrest was an orchestrated coup — as many in France believe, and Nissan denies — the result has been an assertion of Nissan’s primacy in the relationship.
For instance, José Munoz, the popular and effective chairman of Nissan North America — and a Ghosn ally — was abruptly removed from his position in early January. He quit soon thereafter. Another Ghosn ally, Nissan’s HR head Arun Bajaj, was also placed on leave. At Renault, it is widely suspected that Nissan’s goal is to purge the company of Ghosn executives.
Then there are the governance issues. After Ghosn was arrested, Renault — which had been completely blindsided — asked Nissan for the evidence it had compiled against him. The company was rebuffed. In mid-December, it requested that the Nissan board schedule a special shareholders meeting because “the indictment creates significant risks to Renault, as Nissan’s largest shareholder, and to the stability of our industrial alliance.” Renault was also furious that the Renault appointees to the board had acceded to the investigation of Ghosn without informing Renault. It wanted to replace them. Nissan’s chief executive, Hiroto Saikawa, brushed off the request, responding that such a meeting was “not in the best interest of all shareholders of Nissan.”
Renault then asked to appoint some senior managers, as is its right under the alliance agreement. Again, Saikawa said no. On Thursday, Nissan finally announced that it would hold a special shareholders meeting in mid-April. But there is only one agenda item: ousting Ghosn from the board and replacing him with a Renault-appointed board member. This narrow agenda is likely to further inflame Renault.
One gets the sense that the two companies would walk away from the alliance if they could. But they can’t. The companies are just too intertwined at this point. They share a number of key functions, like human resources. Their purchasing operations are combined. Supply chains, logistics, even some research and development work — they’re all converged. Dividing those functions would be a nightmare.
In addition, the auto industry has come to appreciate the advantages of partnerships. Ford and Volkswagen recently announced an alliance of their own. Others will undoubtedly follow. If Renault and Nissan parted ways, they would be adding billions in costs even as their competitors were doing the opposite. It would also be a huge distraction at a time when the global auto industry is slowing down.
To put it another way: The two companies are stuck with each other, whether they like it or not. This week, Saikawa, 65, announced that he will “pass the baton” to a successor in the next few months, after the alliance’s governance issues have been straightened out. Given the mistrust he has sewn at Renault, that is probably a wise decision. Meanwhile, Senard, the new Renault chairman, is a smooth, understated diplomat — the opposite of the often autocratic Ghosn. That will help too.
Ultimately, for all the friction it caused, Ghosn’s decision to form the alliance has benefited both parties. It will get patched up because it has to. And all the while, the man who created it will remain in a Japanese prison, waiting for the trial that will determine his future.
In 2016, the alliance added Mitsubishi Motors. Last week, the company accused Ghosn of taking $9 million in secret compensation.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. He is co-author of “Indentured: The Inside Story of the Rebellion Against the NCAA.”
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