Nissan opposes Renault’s bid for a merger
Talks have been continuing since Renault chair Jean-Dominique Senard first made an informal proposal to Nissan CEO Hiroto Saikawa in April
Tokyo — Nissan is opposing renewed efforts by alliance partner Renault to merge under a holding company because such a structure will not help turn the Japanese car maker around, a person with knowledge of the discussions said.
Talks have been continuing since Renault chair Jean-Dominique Senard first made an informal proposal to Nissan CEO Hiroto Saikawa in April, the person said, asking not to be identified because the discussions were not public. Nissan rebuffed the idea then and has continued to oppose it, the person said.
News of the talks comes as Nissan is set to report on Tuesday its lowest annual operating profit in a decade, hurt by slumping US sales, aging models and a product cycle that’s out of sync. The merger proposal came after the most tumultuous few months in the companies’ two-decade partnership, which was shaken by the shock arrest of the alliance’s chief architect and former chair, Carlos Ghosn.
Nissan declined to comment on the discussions. Representatives for Renault didn’t immediately respond to requests for comment.
A merger under a holding company will not help solve Nissan’s current operational issues, such as high fixed-costs, unprofitable models and flawed Datsun and Infiniti brand strategies, the person said, adding that a new structure will cause delays in addressing these issues because of logistical and regulatory hurdles. Combining the companies under a single entity won’t add benefits of scale because they already share purchasing and development costs, the person added.
Japanese broadcaster TBS reported earlier on Monday that Renault had made a formal offer to merge with Nissan under a holding company structure, citing unidentified people. TBS didn’t elaborate on what it meant by formal, or when the proposal was made. The Japanese government has also spurned efforts by Renault to engage in merger talks, according to the Financial Times.
No formal proposal has been made to Nissan, according to a person close to Renault. A Nissan representative declined to comment on TBS’s report.
Although the French car maker agreed in 2015 not to interfere in the Nissan board’s decision-making, the Japanese company’s financial weakness could give Renault an opening to push harder for a merger. The combination would give Renault and Nissan heft as the industry is going through a radical shift toward electric and self-driving vehicles.
The proposal revived by Senard calls for a holding-company structure, which would provide for equal ownership and board representation for Renault and Nissan, people familiar with the situation have said. While the aim of such a structure is to gain Nissan’s support, Saikawa rejected a request in April by Senard to reconsider a merger, people familiar with the matter have said.
The French and Japanese manufacturers, along with third partner Mitsubishi Motors, make 10.8-million cars each year — nearly double Ford’s global deliveries. The alliance — currently held together by a series of cross-shareholdings — would be second only to Germany’s Volkswagen, with Toyota a close third.
Car manufacturers are grappling with investments needed to keep pace in the race to develop self-driving and electric vehicles, while ride-sharing services such as Uber nip away customers and trade tensions roil markets.
In April, Nissan warned investors of bad times ahead as it cut preliminary profit for the year ended March to ¥318bn ($2.8bn), a 30% decline from the previous guidance, which itself had been lowered. That would mark the first time the Japanese car maker earned less than Renault in a decade.
Nissan may also announce that it’s paring its midterm revenue targets, according to a person familiar with the matter, who didn’t want to be identified discussing company business. The car maker will lower its fiscal 2022 revenue target to about ¥14-trillion from the existing target of ¥16.5-trillion and cut its operating margin target to about 6% from 8%, the person said, confirming an earlier report in the Asahi newspaper. Nissan declined to comment on the Asahi report.
Renault is treading carefully in its relations with Nissan. Their cross-shareholding is governed by an agreement known as Rama, which was last updated in 2015 with extensive governance provisions that have never been made public. Any unilateral move by either Renault or Nissan to tip the balance could trigger an all-out war for control.
Renault owns 43% of Nissan — the bigger partner — which in turn owns 15% of Renault, with no voting rights. The 2015 agreement granted Nissan guarantees preventing Renault from interfering in its governance, a move the Japanese car maker considered necessary because the French government is Renault’s most powerful shareholder.