Nissan hits out at Renault, leaving alliance on shaky ground

The decades-old alliance of Renault SA and Nissan Motor Co. descended into open enmity as the two sides sparred over governance changes at the Japanese automaker, an apparent tit-for-tat following Nissan’s refusal to endorse a deal with Fiat Chrysler Automobiles NV.

Nissan Chief Executive Officer Hiroto Saikawa said it was “most regrettable” that Renault planned to stymie board reforms, after receiving a letter from the French company’s chairman, Jean-Dominique Senard. Renault’s salvo contrasts with more reassuring remarks from French Finance Minister Bruno Le Maire.

The hostilities imperil what has proven one of the most successful automaking alliances, a partnership the companies estimate lopped as much as 5.7 billion euros ($6.4 billion) from their manufacturing, purchasing and engineering costs in the 2017 financial year. The tensions mark a new low in a relationship already strained by the arrest in Tokyo last November of Carlos Ghosn, the industry titan who oversaw the carmakers and their alliance.

The implosion of Renault’s merger plans with Fiat brought the conflict into the open, with Nissan’s reluctance to endorse the deal said to be partially responsible for its failure.

In the aftermath, Senard sent the letter threatening to block the Yokohama-based company’s plans to overhaul its governance structure, changes hashed out in the wake of the Ghosn scandal. Renault holds a 43 per cent stake in Nissan.

In an unusual public statement, Nissan confirmed that it had received the letter, and upbraided Renault for its position. The corporate-governance reform “was discussed thoroughly by Nissan’s board and approved by all board members, including Renault’s own nominees,” Saikawa said in the company’s statement. “Such a stance runs counter to the company’s efforts to improve its corporate governance.”

Nissan also seized on comments made by the finance minister of France, Renault’s biggest shareholder, that his government is willing to reduce its stake to strengthen the alliance. Nissan, which has longed chafed against French influence, would prefer a full exit by the government, people familiar with Nissan’s thinking said, asking not to be identified because the information isn’t public.

“Overall it is a mess, and just makes a tricky situation worse,” said Janet Lewis, an analyst at Macquarie Capital in Tokyo. “Senard’s threat to abstain on the corporate governance reform is very negative for the alliance. He is fast losing any trust Nissan management may have had for a collaborative relationship. Playing hardball doesn’t typically work in Japan, so he will find it very hard to achieve anything going forward.”

Senard, who was brought in by the French government to smooth the relationship with Nissan, has instead pressed Nissan for a merger it didn’t want, then pursued the mega-deal with Fiat Chrysler. In the letter to Nissan, Senard said the French automaker is seeking better representation within Nissan’s plan to set up three committees on nominations, remuneration and auditing, said a person familiar with the matter, who cautioned that Renault hasn’t made a final decision on its vote and was still in negotiations.

While Renault understands Nissan’s desire to improve its governance, the so-called three board level committees system “should not serve as a tool directed or used against Nissan’s largest shareholder,” the letter said. Nissan shareholders meet on June 25 to vote on the structure.

The latest crisis erupted a week ago, when Renault’s merger talks with Fiat fell apart after Nissan abstained two of its board votes for further negotiation, prompting the French state to pause discussions. Le Maire, in Japan to attend G-20 meetings, sought to patch up tensions but ended up reminding the Japanese company of his government’s outsized influence over the automakers with a 15 per cent stake in Renault.

The Japanese automaker has long been uneasy over the arrangement. Amid the instability, Renault has been pushing for closer ties, while Nissan has sought more autonomy. The two need each other more than ever, given the massive investments needed for electric vehicles and self-driving technology.

Renault and Nissan produced a combined 10.6 million vehicles last year. A separation could result in years of disarray because Renault and Nissan cooperate on engineering, manufacturing, supply chain management, purchasing and human resources.

“It’s a difficult relationship, Nissan and Renault,” said Koji Endo, an analyst at SBI Securities Co. “They may want to divorce.”

Le Maire said Sunday that the government’s responsibility was to secure jobs as well as industrial and research sites. He repeated on Monday that France views a Renault-Fiat merger as a good idea, as long as the government’s conditions are met — including Nissan’s backing for the idea. The Japanese government has also played its part “- including by intervening to defend Nissan’s independence from Renault last year.

Le Maire was to meet Japan Finance Minister Taro Aso and Economy Minister Hiroshige Seko Monday.

“Nationalism is rising, and the globalists are losing,” Max Warburton, an analyst at Sanford C. Bernstein & Co. “Perhaps this deal was doomed from the start. We live in an era of de-globalisation and heightened anxieties about national and regional identities. This applies to corporations as well as politicians and individuals.”