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Renault plans to merge with Nissan renews tensions – 26.04.2015 – Market



Renault wants to propose a merger with Nissan, officially putting a plan on the negotiating table that angered the Japanese partner, fueling the suffering of international relations and contributing to the actions against Carlos Gosn.

The French carmaker recently asked the bank's directors that the councilor would submit to Nissan a plan to create a holding company that would combine both partners, according to people informed about the issue. The new company will be split on a more or less equal footing between Nissan's shareholders and Renault's shareholders, and the board will also be set up on an equal footing.

It is a continuation, in a new form, of an idea discussed last year, when Ghosn was still chairman of the boards of both cars. At that time the idea was triggered by a reaction by a group of Nissan executives who quietly contacted the Japanese prosecutor's office on charges of financial crime by the veteran leader of Renault and Nissan.

The exchange of barbs between the two cars in recent weeks shows that the merger remains a burning affair in Nissan; the company's managers believe that the idea is completely impractical. People informed of interactions say Hiroto Saikawa, chief executive officer of Nissan, has not yet heard details of a Renault-hired bank in Tokyo.

But the French car maker is upgrading its plan and believes Nissan's weak performance has recently made it urgently to reshape the alliance, according to people informed about the position of the French carmaker.

"Renault would like to propose a holding company as a solution to Nissan's unhealthy situation," one of the people said. "It's clear that the Alliance is not working properly."

Nissan is a much larger company, with a significant difference, but its 15 percent stake in Renault is frozen by 43.4 percent of shares held by the French carmaker in the Japanese group. In addition, Renault has the right to vote at Nissan's assembly meetings, but the reverse is not the case. The imbalance in the ownership structure was a frequent complaint by Nissan's managers.

A series of arrangements – some of which have been adopted as part of an alliance agreement, so secret that only a few top executives of both companies read it – prevents one partner from taking control of the other. Nissan has promised not to increase its stake in Renault until it interferes with the management of the Japanese company.

Renault's latest idea of ​​a merger threatens to disrupt this delicate balance, although it can serve as a prelude to wider negotiations that will prevent a major crisis. Renault's expectations are that his proposal will serve as a starting point, the people involved say, and many details, including the role of the Alliance's third partner, Mitsubishi Motors, have yet to be decided.

It is also a matter of national pride. Nissan's executives saw their company as technically superior to their partner and believe that there is no reason for a Japanese firm's pillar to respond to Paris. Meanwhile, the French government has 15 percent stake in Renault and wants the country's biggest carmaker to thrive.

Goson has served for years as a unification of the Alliance. His arrest on November 19 erodes the relationship between companies, and has lost all of its executive functions in both. Jean-Dominique Senard, the new Renault president, "wants to take drastic measures to change the atmosphere to create a balanced, fair and 50/50 structure," one person informed of Renault's positions.

Clotilde Delbos, vice president of Renault Finance, said on Friday (19) that the two companies were synchronized. "What we want is the alliance to be irreversible, and that's what we follow in the Nissan company," she said.

However, on Nissan's side, distrust has deepened over the weeks since it became clear that Senard would not allow things to remain the same, say people informing about the position of Nissan.

Senard initially approached Saikawa with the proposed merger of a meeting of the council of the Renault-Nissan alliance in Paris on April 12th, people who are familiar with the conversation.

Renault leader asked Saikawa to call the Japanese investment bank SMBC Nikko Securities, which Renault hired to explain the proposal to Nissan. Saikawa left the board for a short phone call to SMBC Nikko, but was not fully informed about the plan, sources said.

A few days later, the investment bank sent e-mail to Saikawa and its chief subordinate to Japan, pointing to a meeting in Tokyo for a more complete explanation. The two sides have yet to commemorate the meeting to review Renault's proposal, and will now have to be postponed until May 7, when Japan will return from a 10-day post to crown the new king.

The Nissan team will strongly oppose any merger with Renault, said the man on the proposal, saying the company should instead focus on solving performance problems.

Tensions are being prepared after Gosn's arrest when Nissan tried to interrogate Renault employees during their investigation into alleged financial crime by Gosn. Later, Ghosn was indicted by Tokyo authorities on charges involving embezzlement of Nissan for personal gain. He pleaded not guilty and released on bail Thursday.

While Nissan executives agree that a merger may lead to a short-term rise in the company's shares, they fear that negative factors – including the risk that qualified employees in the company will resign – will outperform the positive, person informed about their positions.

Nissan's managers also believe that the idea of ​​merging as a betrayal continues, as Senard publicly told Nissan's headquarters in March that it was too early to talk about the future structure of the alliance. "There seems to be something going on the surface and something very different from below," one person informed of the mood among the Nissan executives.

The SMBC directors Nikko also informed Japan's Ministry of Economy, Trade and Industry High Representative for the Renault proposal, people familiar with the meeting said. "His reaction was not neutral," one of the people said. The ministry has previously tried to secure Nissan to remain independent of Renault, according to messages that The Wall Street Journal has seen. One representative in the auto department of the ministry said that no one is available for comment.

The acceleration of Nissan's downsizing business has recently made Senard work faster, informed people about his thinking. Earlier this week, Nissan released its second warning for falling this year's results, reducing its profit projection by around 30 percent. "Senard believes the problem is urgent," one source said. "He knew that things went wrong, but he did not think much."

In a January prison interview with two French news vehicles, Ghosn said he had spoken to Nissan's Saikawa managing director for maintenance structures at various times in 2018 and told him that autonomy would be respected. But, Gon said, "the resistance was from the beginning."

Wall Street Journal, translation from Paolo Miljaci


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