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Nissan's Ghosn crisis

Paris defiant as Renault-Nissan heads toward showdown

Ghosn denies he intentionally hid his pay

Renault's 43.4% stake in Nissan Motor gives it sway over the direction of the automotive alliance, an advantage the French government hopes to maintain.   © Reuters

TOKYO/PARIS -- As the heads of Renault, Nissan Motor and Mitsubishi Motors prepare to sit down on Thursday for the first time since the arrest of ex-chief Carlos Ghosn, the French government has made clear its intention of maintaining Renault's dominant position in the alliance, looking to safeguard national interests as the automaker's biggest shareholder.

"I do not want any change in the balance of power between Renault and Nissan or the levels of cross-shareholdings," Bruno Le Maire, the economy and finance minister, told French TV news network LCI on Tuesday.

His comment appears aimed at Nissan, which seeks a more equitable structure that Paris fears could make it harder to keep the jobs and investment that Renault provides in France.

Le Maire also indicated on Sunday that the CEO of Renault should remain head of the alliance. That role as alliance chief had been occupied by Ghosn, who was ousted as chairman at Nissan and Mitsubishi after his arrest last week on allegations of financial misconduct. Ghosn remains chairman and CEO of the French automaker.

Nissan apparently still has yet to send the results of its internal investigation to Renault. That absence may make the Japanese company's push to rework the alliance look to its partner like a power grab prompted by accusations about which Renault remains in the dark.

Sources have told Nikkei that Ghosn and right-hand man Greg Kelly deny the accusations of intentionally underreporting the former chairman's pay and are prepared for a full-fledged fight with the prosecution. Kelly also was arrested, and Nissan has removed him as a representative director.

Ghosn is alleged to have deferred around 1 billion yen, or $8.8 million, of his pay yearly from fiscal 2010 through fiscal 2017 without mentioning it on the company's annual report. But Kelly rejects the claim, stating that the payments were not fixed and therefore not yet subject to reporting, sources say. The prosecution is said to possess emails and documents with figures stated, and will use these as evidence in building the case.     

Thursday's meeting will be held at the de facto alliance headquarters in Amsterdam, although Nissan CEO Hiroto Saikawa and Mitsubishi Chairman Osamu Masuko will participate via teleconference. Renault Chief Operating Officer Thierry Bollore will take part as acting CEO in Ghosn's absence.

The French government's heavy involvement in Renault's affairs is part of a long French tradition of state intervention in the management of big businesses to protect jobs and promote economic growth.

Paris, which holds a 15.01% stake in Renault, is more than merely a major shareholder. It must be mindful of the automaker's influence on France's economy. Renault ranks fifth among French companies in net profit, according to data from QUICK-FactSet, and French media say it employed about 48,000 people in the country at the end of 2017.

Efforts at state intervention have created friction between Nissan and Paris before. In 2014, the French government under then-President Francois Hollande enacted a law that automatically doubled the voting rights attached to shares held by the same shareholder for at least two years. This gave Paris more leverage over the domestic corporate giants in which it had invested.

The law also applied to the government's 15.01% stake in Renault, raising concerns that Paris could impose its will on Nissan through the French automaker's 43.4% interest in its Japanese partner.

The economy and finance minister at the time -- Emmanuel Macron, now president -- was widely viewed as a proponent of government intervention. He reportedly sought to engineer a merger between Renault and Nissan in 2015, infuriating the Japanese automaker.

Ghosn had served as a bulwark against interference by Paris. His arrest may give the government greater say over the alliance's direction.

Renault derives about half its net profit from Nissan. If France gets more involved in Renault's management, Nissan may be forced to move production of mainstay models out of Japan, where it employs 59,000 people on a consolidated basis and manufactures about 985,000 vehicles a year. Such a shift would be a heavy blow to local parts makers.

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