Renault needs to play nicely with Nissan to remain competitive

Tokyo/Singapore — Renault chair Jean-Dominique Senard is under increasing pressure to fix the company’s relationship with ally Nissan after its other potential partner picked a different suitor.

The French and Japanese carmakers have had a rocky two-decade partnership that was further shaken by the chair of their alliance Carlos Ghosn’s arrest a year ago — to the extent that Renault earlier in 2019 attempted a merger with Fiat Chrysler. With Fiat Chrysler now merging with French peer PSA, Renault is left clinging to its Japanese companion.

Carmakers need the heft and scale provided by partnerships to face challenges from electrification, the rising popularity of ride-sharing and the emergence of self-driving vehicles. Sticking to the Nissan pact, and trying to improve it, now represents Renault’s best bet to remain competitive in that increasingly cut-throat landscape.

“Renault needs it more than Nissan,” Steve Man, an analyst at Bloomberg Intelligence in Hong Kong, said of the alliance. “They all need to work out those issues and move on and become more profitable.”

At the root of the tension between Nissan and Renault has been a lopsided shareholding structure, with Renault holding 43% of the Yokohama-based carmaker and Nissan owning just 15% of Renault. Given its bigger size and superior earnings performance in recent years, Nissan has long demanded more sway in the alliance, including that Renault reduce its stake.

With Fiat no longer a viable partner option for Renault, the French company has less negotiating power with Nissan, said Tatsuo Yoshida, an analyst at Bloomberg Intelligence in Tokyo.

At a meeting between the companies this week in Japan — as the deal to combine Fiat and PSA headed for the finish line — Nissan executives didn’t explicitly ask Renault for a reduction in the stake, according to people familiar with the matter, who asked not to be named discussing private deliberations.

A Renault spokesperson declined to comment. A Nissan representative said there has been no change in the company’s stance regarding the alliance.

Senard told a French radio channel earlier in October that lowering Renault’s stake in Nissan wasn’t on the agenda, though he cautioned “you can’t exclude anything”.

In the same radio interview, Senard gave Renault and Nissan just months to amend the union.

“If in 2020 we don’t extract the whole virtuous potential of this alliance, I’ll consider that I and my teams have failed,” he said.

Earlier in 2019, the Renault chair pushed for the Fiat merger despite Nissan’s reluctance, and their lack of support for the deal was a chief contributor to its derailment. Nissan wants to focus on fixing the partnership with Renault and viewed the addition of Fiat into the mix as too big of a distraction, according to one of the people.

In an attempt to restore trust, both Nissan and Renault have made changes in top management. Nissan replaced its CEO and Renault has embarked on its own CEO search after ousting Thierry Bollore. Both companies are slowly turning the page on the era of Ghosn, who held their alliance together for years.

Bloomberg