29 May, 2019

FCA-Renault talks could derail Nissan

As Fiat Chrysler Automobiles (FCA) proposes a merger with Renault, Nissan’s 20-year alliance with the French carmaker looks set to crumble.

Autovista reported yesterday that FCA had submitted a merger proposal to Renault, which the carmaker’s board is studying ‘with interest’. The merger would create the world’s third largest carmaker and would significantly alter Nissan’s place in the market.

Should the proposal be agreed, it would bring FCA's brands such as Fiat, Jeep, Chrysler and Alfa Romeo under a common umbrella with Renault Group's Renault, Dacia and Lada brands.

‘The relationship between Renault and its Japanese partners is not as constructive as probably anybody wishes,’ a source familiar with the FCA-Renault talks told Reuters.

‘The FCA view is that Nissan has a lot on its plate... So the time is not right to consider anything other than enhanced cooperation.’

The news of the merger could prove to be another dark period for the Japanese carmaker in a period in which it has already endured a sales downturn, a PR disaster and a strengthened alliance with Renault quashed.

U-turn

It was merely a month ago that Renault suggested a joint board structure with the Japanese carmaker.

The plan would have allowed both carmakers an almost equal number of directors for a new company, in which ordinary shares in both Nissan and Renault would be transferred on a balanced basis.

Merging in this way would have strengthened ties between the two companies but due to reported resistance from Nissan CEO Hiroto Saikawa, the deal fell through. Saikawa is reported to have been unhappy that the proposed deal would mean he would not retain his position as Nissan CEO.

Ghosn’s ghost

Troubles still linger over Nissan due to its former CEO Carlos Ghosn’s part in financial misconduct. This made it hard for the Japanese carmaker to argue for equal footing in the proposed alliance with Renault.

As court proceedings continue, Ghosn seems intent on speaking out against his former employer, saying: ‘It is part of another attempt by some individuals at Nissan to silence me by misleading the prosecutors. Why arrest me except to try to break me? I will not be broken.’

While the company still wrestles with this PR disaster, it makes it hard to stage a comeback or recover lost ground in public opinion.

No quick win

Nissan’s profit forecasts have seen a steady downturn recently and 2018 was its least profitable year in nearly a decade.

ACEA new car registration figures for April also highlight the decline in Nissan’s sales in Europe, which fell 16.7% in the month. The Japanese carmaker was once again the biggest loser in the figures and its sales are 24.8% down year-to-date as it struggles in the wake of the Ghosn scandal.

With profits and sales falling, a strengthened partnership with Renault could have been the quick win to signal a turnaround for the Japanese carmaker. However, as things stand, Nissan is set to endure more pain.