Renault-Nissan alliance meets to determine future structure

November 29, 2018 09:25 CET

PARIS — The board of the Renault-Nissan-Mitsubishi alliance meets on Thursday, putting both sides of the fraught French-Japanese partnership in one room — at least virtually — for the first time since its chief, Carlos Ghosn, was arrested for alleged financial misdeeds.

What transpires may set the direction of a partnership whose future remains very much in flux. Here is what we know — and what we do not — about what to expect at a potentially pivotal encounter.

What each side wants

More than a week after Ghosn’s arrest, Renault and Nissan — as well as politicians in France and Japan — say they are committed to the near two-decade alliance. But their visions diverge. Renault has been happy with the status quo, which it dominates, and wants to make it permanent. Nissan is eager to equalize power at the alliance level and assert Japanese control over one of the country’s most important companies, according to people familiar with the matter.

Will there be a showdown?

The alliance is designed to run by consensus, enforced by Ghosn’s presence at the top. But while he has denied some of the allegations, he remains in jail — and his absence could lead to unrest. His former protege, Nissan CEO Hiroto Saikawa, is vice chairman of the alliance and may have a window to attempt to force through some changes. Saikawa and Ghosn each have four votes on the alliance board. The other eight members, four from each side, hold one vote each. The chairman has a tiebreaker vote.

Renault’s interim leader Thierry Bollore will attempt to exercise Ghosn’s voting power at the alliance, according to people familiar with the company’s thinking. It’s not clear whether Nissan will object. Alliance board decisions are made by ‘simple majority of votes of the members present or represented,’ according to Renault’s 2017 annual report. Bollore, Renault’s chief operating officer, was made deputy CEO with Ghosn’s powers on Nov. 20.

Representatives for Renault and Nissan declined to comment.

The alliance board

While Nissan’s goals are not clear — the company is not said to be looking to make structural changes to the alliance just yet — Renault is likely to resist any proposal that would diminish its power. One possibility is for Nissan to propose governance changes, such as splitting the chairman and CEO roles Ghosn now holds.

Ghosn has been fired as chairman by Nissan and Mitsubishi Motors, but not Renault, where he is still nominally chairman and CEO. But he cannot be stripped from his alliance roles without the French company’s approval. Renault has the right to appoint the umbrella group’s chairman and CEO, while Nissan gets to appoint the vice chairman. Renault still has not had access to the extensive dossier compiled by Nissan outlining Ghosn’s alleged transgressions, people familiar with the matter have said.

The setting

The meeting, which was set up before Ghosn’s arrest, will be held Thursday morning, at the alliance headquarters near an Amsterdam marina. Saikawa is said to plan to participate via video conference, while it’s unclear whether Bollore will attend remotely or in person. There is no plan for a press conference. Executives are scheduled to discuss alliance operations, such as mobility, regional development, r&d and its Russian business.

Alliance representatives separately met with Daimler, which has small cross-ownership holdings with Nissan and Renault, on Wednesday.

Market context

Investors blindsided by Ghosn’s arrest for alleged financial misconduct and fearing a destructive corporate battle have sold both companies’ shares. The selloff has not been massive though, with Renault down about 4 percent since last week, and Nissan about 2 percent lower. At $37 billion, Nissan’s market value is about three quarters bigger than Renault’s.

“The Japanese are going to be obviously lobbying for more control,” said Richard Hilgert, an analyst at Morningstar in Chicago. “Given the scale of Nissan versus the scale of Renault, I think that there probably will be some changes in the overarching management of the group.”

Ghosn’s status

While Ghosn is still in jail, he is beginning to talk through his lawyers. On Wednesday, he denied Japanese reports that he may have transferred 1.7 billion yen ($15 million) in personal trading losses to Nissan. Ghosn’s deferred pay ballooned over the past eight years as he sought to downplay his compensation in front of shareholders, people familiar with the probe said. That practice was one focus of the investigation that led to his arrest, they said.

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