The Renault-Nissan marriage is all but over
The fragile alliance between the two car makers may make a separation the best move, unless a joint venture suits them both
Even after a relationship is dead, couples often go through the motions of remaining in a marriage. That’s the best way to characterise what’s left of the alliance between Renault and Nissan.
Renault must sell down its 43.4% stake in its Japanese partner to 5% to 10% and both sides should “invest in new ventures”, Nissan’s senior vice-president Hari Nada wrote in an e-mail to colleagues, the Wall Street Journal (WSJ) reported at the weekend.
This was the view of independent director Masakazu Toyoda and the two sides should come up with some sort of joint venture (JV) to show the alliance isn’t dead, giving Renault chair Jean-Dominique Senard the room to unwind the cross-shareholdings that underpin the relationship, the WSJ reported.
To judge by the picture this paints of internal discussions within Nissan, the Japanese company is only interested in maintaining the appearance of an alliance with Renault and its 15% shareholder, the French government. Making a joint commitment to re-affirm a bond isn’t uncommon for people in a failing relationship, but it’s no way to run a business.
Carlos Ghosn’s pursuit of volume growth at any cost is one reason why Nissan is now plagued with overcapacity and facing drastic job cuts
If Nissan is sincerely committed to a JV, the first thing it should do is identify a strategic opportunity, work out what synergies it would bring, and find a way to operate it. Forming a JV just to get your partner to agree to the terms of a divorce puts your employees’ careers at the mercy of these corporate manoeuverings.
For those at Renault most committed to the logic of the merger with Fiat Chrysler Automobiles (FCA) that was declared dead in June, this might count as good news. Senard has publicly talked down the prospect of the tie-up being renewed, but this suggests that Renault has been looking for ways to revive the alliance behind the scenes.
A tie-up between European giants, in the manner of the mergers that created Airbus, Air France-KLM, and IAG, seems a far more congenial outcome than the bitter remains of the Renault-Nissan marriage. FCA’s strong business in SUVs and North America would also complement one of the most obvious shortcomings that Renault would suffer if it lost its alliance with Nissan.
At the same time, the writing is on the wall for any further integration between France and Japan. Nissan seems committed to preventing any further convergence. Whether or not a Potemkin village JV is agreed to, the sort of ambitious activities pushed in the Carlos Ghosn era — development of modular designs shared between Renault and Nissan vehicles, or moving the manufacturing of the Nissan Micra from the Japanese company’s Chennai plant to a Renault factory north of Paris — are unlikely to see the light of day again. The more likely outcome would be something eventually resembling the far more limited co-operation between Daimler and the alliance.
Married vs cohabiting
Does it matter whether Renault and Nissan are married, or merely cohabiting? In many ways, the alliance has been dead since Ghosn and his deputy Greg Kelly were arrested by Japanese authorities last November. As my colleague Anjani Trivedi has written, Nissan, in particular, may be better off resolving its substantial problems on its own rather than getting involved in the complexity of another multi-billion dollar cross-border merger.
Still, the risk for Nissan is that by turning away from its European partnership it will leave itself too small to manage the vast capital expenditures and research and development costs necessary as the global car industry seeks to reverse slumping sales and manage the transition to electric vehicles and greater automation.
Ghosn’s pursuit of volume growth at any cost is one reason why Nissan is now plagued with overcapacity and facing drastic job cuts. But the vision he was pursuing before his arrest — of a company as transnational as he is, headquartered in the Netherlands and with operations all over the world, and not especially beholden to either the Japanese or French governments — is now unlikely ever to materialise.
That’s a tragedy. A Renault-Nissan alliance free to pursue profitable growth in the interests of the business as a whole, rather than being turned into the plaything of nationalist interests, is the likeliest way for the two companies and their workforces to prosper. If management in Paris and Yokohama are quietly giving up on that future, both companies may live to regret it.
A marriage where neither partner is committed is the worst of all worlds. If separation is out of the question, Nissan and Renault need to find a way to make this relationship work.
• Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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