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Nissan-Renault alliance

Nissan CEO warns Renault intervention would break up alliance

Shareholder meeting reveals tensions that still plague carmaking alliance

Captured image from You Tube shows Nissan President and CEO Hiroto Saikawa at the shareholder's meeting in Yokohama on June 25.

TOKYO -- Nissan Motor CEO Hiroto Saikawa on Tuesday declared he would "never let" shareholder Renault interfere in the Japanese carmaker's management, in a sign of the deep tensions that continue to plague the two companies' crucial carmaking alliance.

Saikawa was speaking to shareholders at the annual general meeting in Yokohama, where investors approved a slate of corporate governance reforms that had initially been opposed by Renault. The French company, which owns 43.4% of Nissan, had demanded greater representation on new governance committees, but dropped its opposition after the Japanese carmaker conceded. 

"I don't believe Renault is increasing intervention in Nissan's management under the structure we are proposing today, and I will never let them do that," he added in response to a shareholder question. 

The Nissan boss said he was committed to the alliance with Renault. However, he warned that any attempt to interfere with his company's independence could shatter the partnership. 

"The alliance has been successful until now because we have respected each others' independence," Saikawa said. "If the relationship becomes a win-lose one, the principle [of an alliance] will break up very quickly."

Moreover he reiterated his opposition to a merger with the French partner, saying it was "not a good idea."

Saikawa instead called for a discussion about the companies' capital ties. "As our earnings recover, it is important to have an opportunity to think about our future with Renault," he said. "I want to have a detailed conversation with Mr. Senard."

Tensions between the two companies have been apparent ever since the arrest of former Nissan chairman Carlos Ghosn last November on several charges of financial misconduct, just as he was about to propose a merger of Renault and Nissan. Ghosn denies the charges.

Nissan's newly launched nomination, remuneration, and audit committees are intended to prevent the concentration of power in the hands of a single executive, as was the case under Ghosn, who held the chairmanships of Renault, Nissan and the alliance.

Renault chairman Jean-Dominique Senard, who will sit on the nomination committee, had agreed to recuse himself from meetings where there was conflict of interest between the companies, Saikawa said.

"Mr. Senard... will be acting as director of Nissan. Mr. Senard totally understands this," he added. 

Senard, who joined the Nissan board in April, said it had not been his intention to attack the company when opposing the corporate governance reforms. Renault had merely wanted "parity and respect," with its 15% shareholder, Nissan, which had directors on the French company's board committees. In the final compromise Renault CEO Thierry Bollore will sit on the audit committee.

"I did everything I could to smooth the relationship of the alliance that I have found in a much worse state than I thought," Senard said. He had given up the idea of being Nissan's chairman, although he had "right to ask for it," he said. He had also agreed to a "consensus-based" management of the operating board that ran the alliance between Renault, Nissan and Mitsubishi Motors

The Renault boss also sought to reassure shareholders that any decision about a merger was the "Nissan board's responsibility."

Despite his comments, some shareholders still voiced concerns about Nissan's independence, given the imbalance in the shareholding structure between the two companies. "I don't think the current cross-shareholding structure would lead to the equal partnership, as shown by Renault's initial opposition against the governance reform," said one shareholder.

Another investor asked how Nissan divides its research and development expenses with Renault and earns compensation from the French company's use of Nissan's advanced technology. He pointed to the reduction in forecast dividend payout from 57 yen in the year to March 2019 to 40 yen for 2020.

Investor sentiment has been depressed by expectations of lackluster earnings in the coming year. Nissan said net profit in the fiscal year ending in March 2020 would fall 47% to 170 billion yen ($1.5 billion) due to its sluggish sales in the U.S. and Europe.

Although an 11-member board, including Saikawa was approved, the chief of Nissan came in for questioning by investors, after some proxy agencies advised shareholders to vote against his reappointment. One investor questioned the roles of management who had worked with Ghosn. Their responsibility for the company's recent crisis was "unclear," he said.

Analysts were pleased that the corporate governance reforms were passed, however. "We believe the new governance framework Nissan plans to implement could strengthen the company's internal checks and support its efforts to turnaround its operations," said Motoki Yanase, senior credit officer at Moody's Japan. 

"For the moment, Nissan is not considered as a long-term investment target by institutional investors due to its fragile governance," said Seiji Sugiura, senior analyst at the Tokai Tokyo Research Institute. "The committees structure will be the starting point for better earnings."

However, some were skeptical about the fate of the Franco-Japanese alliance.

"The process for dealing with Renault on this governance reform prompted the both automakers to doubt each other," said Sugiura. "Renault's behavior is justifiable in terms of logic of capital, as Nissan's biggest shareholder, but the current discussion between the automakers seem to be a long way from improving the alliance's management and increasing its global competitiveness," he added.

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