PARIS -- Japan's Nissan Motor and France's Renault are in talks to adjust their capital ties -- an effort to keep the French government from meddling too much in their operations.
Renault looks to attach voting rights to the 15% of its shares held by Nissan. To do so, the French automaker must cut its stake in Nissan to below 40% from the current 43.4%, circumventing a French law prohibiting a company more than 40%-owned by another company from exercising voting rights on shares in the dominant affiliate.
The move is intended to prevent the French government -- Renault's leading shareholder -- from gaining excessive influence over the company when its share of voting power grows to 28% next spring under the so-called Florange law. The policy, enacted last year, automatically doubles the voting power attached to shares registered for more than two years, and is seen boosting government influence over a variety of private-sector businesses.
That power would be diluted if Nissan -- Renault's second-largest shareholder -- gained voting rights. The Japanese automaker could also then act as an ally of Renault's at shareholders meetings, allowing the French company's management to push through measures opposed by the government.
Such an ally would have been of use at April's meeting, where the implementation of the Florange law came up for debate. A two-thirds majority could have kept the law from applying to Renault. But a measure championed by management opposing the law garnered only 60.53% approval, with 39.39% against, resulting in the coming voting-power boost.
Renault faces a tough task. It certainly wants to stay on friendly terms with Elysee Palace, but government requests that place priority on domestic affairs could run counter to the Renault-Nissan alliance's global strategy.
The two automakers' partnership dates back to 1999, when Renault bought a stake in an ailing Nissan. The Japanese carmaker later returned the favor. Dividends from Renault's Nissan shares were largely responsible for keeping the company in the black following the European debt crisis. Nissan will also begin making its mainline subcompact, the Micra, at a Renault plant in France next year, aiding the automaker further.
The threat of French government interference is not purely hypothetical. The state blocked an attempt five years ago by Carlos Ghosn, CEO of both Renault and Nissan, to move production of small Renault cars to Turkey. The move was intended to cut costs during a bout of lackluster earnings.
Many fear that expanding the government's voting rights could also lead to interference in Nissan's management. The new law could throw off the delicate balance between the two partners, a Renault executive said.
Ghosn has so far played a large role in keeping Nissan and Renault on an equal footing despite the French automaker's bigger capital presence. Granting the Japanese company voting rights would make for a more equal partnership on paper as well.