Paris determined to keep tight rein on Renault-Nissan – Nikkei Asian Review


TOKYO — The arrest of alliance head and linchpin Carlos Ghosn has not deterred the French government from its push to permanently combine Renault and Nissan Motor in a way that would strengthen its influence over both.

French newspaper Le Figaro reported Monday that Renault will hold a board meeting as early as Wednesday to determine its new leadership. The French government — which owns about 15% of Renault — is said to be leading the search for Ghosn’s successor as CEO, raising the possibility that the new chief will officially seek a merger with Nissan. Paris recently sent a delegation to inform Tokyo of its intention to bring the two automakers together under the umbrella of a holding company.

Paris has long wanted to bind the pair irrevocably. Renault, which owns 43.4% of Nissan, derives much of its income from dividend payments from its larger partner and depends on Nissan technology in such areas as electric vehicles. And Nissan cars are produced at Renault plants in France, creating jobs in a country suffering from high unemployment.

French Economy Minister Bruno Le Maire has reportedly asked to meet with Japanese counterpart Hiroshige Seko. He hopes to do so at this week’s meeting of the World Economic Forum in Davos, Switzerland, which Seko is attending, though scheduling issues may make it difficult to arrange.

This is believed to mark Paris’ third push for integration. In 2015, then-Industry Minister Emmanuel Macron — now president — sought to strengthen the government’s hold on Renault using the Florange law, which doubles the voting rights of longtime shareholders.

The move was believed to be part of a bid to engineer a merger under terms that would have given the French government substantial influence over the alliance. Ghosn objected, and the two sides eventually settled for an arrangement under which Paris could exercise double voting rights on issues such as strategic operations in France.

Early last year, the French government demanded that Ghosn pledge to make the alliance “irreversible” as a condition of his reappointment as Renault CEO. Ghosn was reportedly considering combining the two automakers under a holding company, but any such plans would have been scuttled with his arrest in November.

At first glance, a holding-company-based arrangement seems advantageous to Nissan, since control is typically based on the valuation of the companies involved.

Nissan is nearly twice as large as Renault, with a market capitalization of 3.87 trillion yen ($35.3 billion) to its partner’s 16.83 billion euros ($19.1 billion). This would mean splitting the new company’s shares roughly 65% to 35% between Nissan and Renault shareholders, though the actual split would depend on how their stock prices move.

But the capital relationship between the automakers complicates this picture. Once Nissan’s shares were converted into holding company stock, Renault would be entitled to 43.4% — equivalent to a roughly 28% stake in the new company, assuming a 65-35 split.

Meanwhile, the French government, with its 15% stake in Renault, would own only about 5% of the holding company. Though this would seem to weaken its position, this could give the French contingent as a whole — that is, Renault plus Paris — direct ownership of about a third of the new entity.

That would essentially give them veto power over important proposals requiring two-thirds majority approval at shareholders meetings, something Nissan is loath to allow. CEO Hiroto Saikawa insists that the issue of rethinking the capital relationship between the automakers is “not at the discussion stage.”

The Japanese company assembled a highly secret internal team of experts to analyze different integration models, but apparently found that Renault would remain on top in every case.

Nissan worries that integration under the holding-company model advocated by Paris would give the French side greater influence regarding contentious issues such as the new entity’s location. Paris is expected to push for it to be headquartered in France for tax purposes. Ghosn had reportedly considered the Netherlands as an option, but the Elysee is unlikely to budge on this point.

The debate would likely also draw in the Japanese government, which is conscious of its own shrinking tax revenue.

Board appointments could become a flashpoint as well. The head of the holding company and the proportion of board members from each of the two automakers would reflect the balance of power. An integration spearheaded by the French government would risk pulling the alliance further away from the partnership of equals that Nissan wants.

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