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Carmakers mull rebalancing to counter Paris' merger push

PARIS -- Nissan Motor and Renault are rethinking their capital relationship as the French government seeks to advance its interests via new legislation granting longtime shareholders extra voting rights.

Unwelcome disruption

The so-called Florange law, which doubles the voting rights of shares held by the same owner for at least two years, aims to encourage longer-term thinking in corporate management. But it will unbalance the alliance between Nissan and Renault, according to Carlos Ghosn, CEO of both automakers.

     The French government, Renault's top shareholder, boosted its stake to block an attempt this past April to opt out of the Florange law at a general shareholders meeting. It will hold roughly 28% of voting rights next April, when the legislation takes effect. The government is using its strengthened position to press for a Nissan-Renault merger under terms allowing it to retain significant influence, sources said.

     Both automakers refused and asked the government to sell off a portion of its Renault stake or otherwise scale back efforts to gain more control. With the two sides unable to reach a compromise, talks broke off by Thursday. Renault's board rejected the merger proposal at an emergency meeting Friday and discussed ways to counter Paris' influence.

     Renault owns 43.4% of Nissan. But the Japanese automaker holds only a 15% stake in Renault -- all without voting rights because of French cross-shareholding laws. Nissan would be awarded voting rights if Renault cut its stake to below 40%. With the rights diluted and the application of the Florange law, Nissan and the French government would likely each hold about 23% of voting rights. Paris would probably object to such a move.

Conflicting priorities

The government urgently needs to tackle unemployment, which has been stuck above 10%. The auto industry's links to a wide range of other businesses make it a potentially rich source of jobs. If Paris gained more sway over the alliance, it could pile on pressure to contribute to domestic employment.

     Nissan has built the Micra compact in India but decided to shift production to a Renault plant in France to boost capacity utilization. The automakers worry that their strategies for optimizing production globally will clash with government policy.

     The Japanese automaker has bridled at the push for a merger that would affect its own operations. "The partnership between Renault and Nissan has yielded substantial benefits," Chief Competitive Officer Hiroto Saikawa, Nissan's highest-ranking Japanese official, said Friday. "We hope to reshape the foundation of the alliance to create an environment where both companies can concentrate on growth."

     Rather than merge, the automakers have integrated such operations as development and sales while preserving their independence and corporate cultures. "The current partnership is a major asset for Nissan," said Saikawa, adding that it creates billions of euros in synergies.

     Crisis-stricken Nissan sought investment from Renault in 1999. Ghosn, then an official at the French automaker, joined the Japanese company as CEO and undertook sweeping restructuring. Nissan now sells 5.3 million vehicles a year worldwide, nearly twice the Renault group's 2.7 million, and boasts a larger market capitalization. Nissan is expected to log record profits for the first time in a decade in fiscal 2015 on solid North American sales.

     The alliance, built on a spirit of equality, has been held up as a success story in an auto industry where other global partnerships have dissolved.

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