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Renault and Nissan are losing sight of the bigger picture

Clash of egos is hurting ability to compete

| Japan
It is only fair that Renault give Nissan a bigger share of profits.

Can Carlos Ghosn escape punishment? And as the Nissan-Renault clash intensifies, can Japan's global reputation evade conviction?

One thing is clear about this clash of corporate titans: there are no heroes. Nissan Motor looks vindictive amid the palace coup that ousted Ghosn. Neither Nissan CEO Hiroto Saikawa nor Renault's new Chairman Jean-Dominique Senard has distinguished himself. Prime Minister Shinzo Abe of Japan and President Emmanuel Macron of France have so far failed to find a solution. Japan's legal system is losing in the court of global opinion.

As all the parties involved bicker and fiddle, the global auto industry is burning.

Sales in China, the most important market, went into reverse in 2018 for the first time since 1990. What is more, the downturn is global. Today, the main worry is slowing economic growth and trade wars. Tomorrow it will be millennials, a generation that appears uninterested in owning cars at all. And Toyota Motor just joined forces with Panasonic to overtake Nissan in electric vehicles.

It is time to set egos aside and focus on the industrial challenges. There is overwhelming logic for the three-way Nissan-Renault-Mitsubishi alliance to remain intact. But how?

The course correction begins in Yokohama, although blame should be shared for the Ghosn scandal keeping Japan Inc. in global headlines for all the wrong reasons since November. Ghosn certainly is not the clear-cut hero some suggest.

The Brazilian-born, Lebanese-raised Frenchman did save Nissan from the scrapyard after his arrival in 1999, aged 45. Ghosn quickly reversed heavy losses, trimmed massive debt and repaired a badly-damaged brand. The stunning turnaround turned him into a hero, even inspiring "The True Life of Carlos Ghosn," a manga series.

Yet Ghosn got lost in his own celebrity. The Nissan-supplied properties, the private jet fleets, the off-the-books compensation schemes, the epic parties from Paris to Rio de Janeiro smack of a chieftain building a personal empire, not reorienting a global colossus for the challenges ahead.

That said, Nissan also got lost in the old Japan Inc. playbook. Saikawa and the rest of the senior management should have reprimanded Ghosn or made the case for his dismissal, in the way public companies are supposed to act. If the fear was that Ghosn might engineer a full-blown merger with Renault, the answer should have been transparent discussions with the board. Not palace coups.

Tokyo, meantime, needs to show it is sincere about Prime Minister Abe's pledges to improve governance. Reports from The Wall Street Journal and others that Japan's government intervened in the Nissan-Renault merger issue smack more of the Japan Inc. of 1985 than the one Abe claims to be creating for 2025.

Ghosn's detention has thrown a harsh global spotlight on Japan's legal system. Why, pundits ask, have serious misdeeds at Kobe Steel, Olympus, Takata, Tokyo Electric Power, Toshiba and elsewhere been treated in a much less draconian manner than those which are alleged against Ghosn? Is xenophobia at work? His lawyer, Junichiro Hironaka, is right to worry this "could signal that Japan is unpredictable and excessive in what authorities are allowed to do to individuals in terms of conducting business."

Paris, for its part, must bow to industrial realities. Renault's $6 billion bailout 20 years ago did save Nissan. But Nissan's revival flipped the script. Today, Renault, which owns 43.4% of Nissan, receives most of its income from Yokohama. Nissan's reach in the North American and Asia-Pacific markets eclipses Renault's. Renault errs in viewing Nissan as the junior partner.

France's obsession with protecting a national champion deserves some blame. Its 15% nonvoting stake in Renault warps incentives and priorities. Macron argues that Nissan's efforts to shake off French control add to the problems piling up on his desk in the Elysee Palace. Yet what of his own culpability? In 2015, as a 37-year-old economy minister, Macron tried to double France's Renault voting rights. Many insiders argue that maneuver fueled distrust, planting the seeds of this crisis.

It is only fair that Renault give Nissan a bigger share of profits. Nissan also deserves its own person at the top. Paris wants to install Senard to play the same supersized role Ghosn did. Look how that corporate governance model ended. A strong, respected, independent leader at Nissan's Yokohama headquarters seems the best way to clean house and heal the rifts with Paris.

Paris wants to install Senard to play the same super-sized role Ghosn did.    © Reuters

Is that man 65-year-old Saikawa? Some heads need to roll and Saikawa's culpability for some of today's chaos suggests he might not be the best leader. Along with a strong Ghosn successor, Nissan needs genuinely independent directors, people who ask hard questions, rather than enable a charismatic chieftain.

Most important, though, is maintaining the alliance and infusing it with greater trust and cooperation. There is not a moment to waste. Nissan forecasts a $4.7 billion operating profit, down 10%, in the fiscal year ending March.

More than ever, the global car industry is about scale and bold research and development. Toyota's tie-up with Panasonic, the latter's work with Tesla's Gigafactory in the Nevada desert and China's massive investments in the electric cars market are a call to action.

Putting egos aside would empower Renault, Nissan and Mitsubishi to push ahead with sharing technology, car platform designs, sales networks and marketing budgets. It also is necessary if Nissan is to repair its image, one further tarnished by last year's vehicle quality scandals.

Sadly, this bigger picture is getting lost as Tokyo and Paris clash. Tensions may only increase as Tokyo puts Ghosn on trial later this year. He is charged with aggravated breach of trust and falsely filing statements involving $80 million of deferred income (Ghosn says he is innocent).

Thriving in this globalized, highly competitive era requires that each member of the alliance improves its performance and avoids game-playing. The more egos trying to grab control of the steering wheel, the greater the odds that all three carmakers will get left in the dust.

William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades." He was given the 2018 prize for excellence in opinion writing by the Society of Publishers in Asia for his Nikkei Asian Review work.

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