08 August, 2019

The Renault-Nissan state of play

Autovista Group journalist Phil Curry looks back over the Renault-Nissan relationship as their alliance becomes even more strained.

Renault and Nissan have been working together in a stable and harmonious alliance for a number of years, or so it seemed. Events since December last year, however, have painted this partnership in a very different light.

The alliance, which recently expanded to include Mitsubishi, is considered among the earliest forms of manufacturer collaboration, having been established 20 years ago. This trend is now sweeping the industry apace as costs of technology development rise and pressure mounts from legislative and external forces. Both companies retained their independence, producing their own vehicles on their own platforms, but benefitted from shared developments and market penetration.

Ghosn crisis

However, in November 2018, news came to light that Nissan chairman and Renault CEO, Carlos Ghosn, had been arrested and detained in Japan over accusations of financial misconduct in his role at the Japanese manufacturer.

It later transpired that Nissan CEO Hiroto Saikawa might have been responsible for alerting the authorities, following the Brazilian’s attempts to manoeuvre a full takeover of the company by Renault. The move started a lot of finger-pointing at Nissan, with allegations of self-dealing and filing of false statements rife in the business.

The move also highlighted that Nissan, under Saikawa’s leadership, is not happy with its role in the alliance. At a time when carmakers are working closer together, the move to oust Ghosn showed that rather than forge closer ties through a merger, the carmaker would rather be an individual entity running its own affairs.

‘We want a win-win relationship with Renault,’ said Saikawa in June. The alliance has been successful until now because we have respected each other’s independence.

‘If necessary, we will put our capital structure on the table. If the relationship becomes a win-lose one, the relationship will break up very quickly.’

Shareholding dilemma

The Ghosn move also shone a light on the current makeup of shares between the two businesses. Renault currently has a 43.4% stake in Nissan, with seats on the board and therefore voting rights on its decisions. However, the Japanese carmaker only has a 15% non-voting stake in the French manufacturer.

To sour the waters further, Renault initially ‘stuck by their man’ and refused to remove Ghosn from his role as CEO and chairman. When Nissan provided further evidence to the company, and as allegations surfaced about further financial wrongdoing in his position at the French carmaker, it accepted his resignation and split the positions, installing Thierry Bolloré as CEO and Jean-Dominique Senard as chairman.

Bolloré and Senard eventually took seats on the Nissan board following the long-standing dispute, despite the Japanese company suggesting that under a new corporate structure, it did not need to grant such places.

‘For us, it is so important that we continuously improve our alliance. Not only for now, but also for the future and this is the mindset which we are in, and these are the discussions we have with our partners,’ Bolloré said following the appointments.

FCA merger

While things seemed to be progressing slowing in rebuilding the partnership, things turned again earlier this year as Fiat Chrysler Automobiles (FCA) approached Renault with the offer of a friendly merger.

Suddenly, Nissan had a bargaining chip. While it could not vote, it could make things difficult for Renault as it looked at the potential of a deal with the US-Italian company. As things transpired, FCA pulled out of the merger citing difficulties with both Nissan and the French Government, which holds a 15% stake in Renault.

Yet the idea of a tie-up is not dead and talks between Nissan and Renault are ongoing, with the idea of the French company reducing its stake very much on the table.

It remains unclear how fast the talks will advance with differences in how the two companies want to rebalance their capital structure. Nissan is aiming to reduce Renault’s stake to 20-25%, according to people briefed on exchanges, while the French carmaker envisions a holding of 30-35%.

Current state

The alliance between Renault and Nissan looks rocky, even if both sides state that they want it to continue. The FCA deal highlights just how at odds the two businesses are. At present, Nissan needs Renault more than ever. The carmaker is suffering a collapse of its European sales and is reducing its global workforce by 12,500 as it also reviews its production sites.

Breaking off its partnership could leave it vulnerable to its current state, and in a time when cross deliverance of strategies is key, as seen with Ford/Volkswagen and Daimler/BMW, shutting down a partnership that could lead to cross-development and lower research costs may come back to haunt the Asian carmaker.

‘The automotive industry is under extreme transformational pressure, and companies are reaching out for partnerships and seek consolidation,’ states Christof Engelskirchen, Chief Economist at Autovista Group. ‘We will see more of this over the coming 24 months. It is neither rational nor economically viable even for the larger OEMs to independently fund the investments required to build scalable BEV platforms or make advancements towards the technology required to develop the autonomous vehicle.’

The coming weeks and months will give us a clearer picture of the alliance and its future. Whether the deal with FCA can be reignited or not, both Renault and Nissan are dependent on their cooperation but perhaps one more than the other.