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Nissan's Ghosn crisis

Renault's revived push for Nissan merger follows financial woes

Status of alliance remains issue as Japanese automaker prepares new leadership

Renault Chairman Jean-Dominique Senard, left, speaks at a news conference with Nissan President Hiroto Saikawa and Mitsubishi Motors CEO Osamu Masuko on April 12.   © Reuters

TOKYO/PARIS -- To get an idea of why Renault is in such haste to press for a merger with Nissan Motor, one should adopt an approach similar to the financial misconduct case launched against the former alliance boss Carlos Ghosn: follow the money.

Renault once again floated the idea of a business integration to its more successful Japanese partner earlier this month, Nikkei reported. The move came soon after the two sides declared an unofficial cease-fire on that debate following Ghosn's arrest in Japan last November.

But it also followed the February release of Renault's 2018 earnings report, which revealed a particularly disappointing year for the French automaker. Operating profit plunged about 20% to 2.98 billion euros ($3.35 billion) for the 12 months through December, the first decrease in six years. Net profit performed even worse, sinking 37% to 3.3 billion euros.

The profit contraction stemmed chiefly from currency pressures. But Renault's unit sales for the first quarter of 2019 have dipped 6% from a year ago, due largely to the company's withdrawal from Iran and the slowing Turkish economy.

Renault Chairman Jean-Dominique Senard pitched the merger sometime around the Alliance Operating Board meeting April 12. That event brings together the heads of the two car manufacturers, plus that of the third member of the automobile alliance, Mitsubishi Motors. Nissan President and CEO Hiroto Saikawa shot down the idea on the spot.

A Renault spokesperson declined to comment on the veracity of Nikkei's report.

Nissan holds a 15% nonvoting stake in the French automaker. The Japanese company is 43.4% owned by Renault, which itself is 15% owned by the French government. Paris has expressed a strong desire for the two automakers to unite. After Ghosn was reappointed as Renault's chairman and CEO in February 2018, Paris demanded that he make the relationship "irreversible" during his four-year tenure.

French President Emmanuel Macron, who faces reelection in 2022, is wallowing as low as the 20% territory in opinion polls. A merger with Nissan would provide a crowning achievement he can take to voters.

"Renault's latest attempt to accelerate the collaboration and take it to a final merger is in line to what Mr. Ghosn was looking for," Juan Felipe Munoz-Vieira, global automotive analyst at Jato Dynamics, said in an email. "They need Nissan more than Nissan needs Renault because of the current situation of both companies. Nissan has a bigger presence in the world's two largest markets, USA and China, whereas Renault is still very dependent on the European market."

During last month's interview with Nikkei, Senard indicated that he would exercise a level of independence from the French state.

"All shareholders have the freedom to speak, but when there's a person with a mandate, you have to let the person finish the mandate till the end," Senard said. "I don't have any difficulties for that to be understood."

But the French government was the shareholder that pushed hard for Senard's appointment to the top.

Renault also has revived consolidation as an issue ahead of Nissan's next shareholders meeting in June. There, the Japanese company aims to inaugurate an independent nominating committee, and a new leadership team headed by Saikawa will be front and center of the agenda.

Nissan formed a governance committee to help the company prevent another scandal similar to the financial and breach-of-trust charges leveled against Ghosn, who played a dominant role at all three automakers in the alliance. The committee last month recommended a board of directors seating about 11 members, with outsiders comprising the majority. Nissan would have to nominate members by mid-May so that shareholders can vote on the slate in June.

Nissan and Renault will choose a total of five directors combined, and the two automakers signed a pact allowing Nissan to have the extra seat among the five. Senard will join Nissan's board as well, and both sides have agreed on having the Frenchman assume the post of vice chairman of boardroom meetings. It would be no surprise if Renault hardens its position on a merger from its perch on the board.

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