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Michael Taylor14 Jun 2019
NEWS

Nissan Alliance is Renault’s priority, not FCA

Renault still wants a merger with Fiat Chrysler, but has to fix Nissan Alliance first

The biggest car-making alliance in the world is on shaky ground, Renault’s chairman has admitted.

Not once during yesterday’s annual general meeting did chairman Jean-Dominique Senard mention Fiat Chrysler Automobiles, despite the Italian-American giant’s recent on/off merger offer.

Not until the floor was thrown open to shareholders for questions, anyway, and then it became clear: Renault’s priority is to fix its broken alliance with Nissan (and Mitsubishi) rather than adding FCA – but it has left the door open to try again later.

Jean-Dominique Senard has a lot of work to do

Senard (pictured) admitted there was tremendous tension between Renault and Nissan after the Japanese company helped imprison its former boss Carlos Ghosn and rejected a full Renault merger of its own.

Both Nissan and Renault have tried to play the victim since Ghosn’s repeated stints in prison, but Senard admitted the 20-year Alliance needed work from both sides.

The Ghosn scandal “left the alliance more damaged than what was initially apparent,” Senard said.

The French view of the scandal is generally that current Nissan CEO Hiroto Saikawa plotted for Ghosn’s removal to stop a full merger of Nissan with Renault.

Carlos Ghosn is in jail

Renault owns 43 per cent of Nissan and has full voting rights, while Nissan only holds 15 per cent of Renault and no voting rights at all. And that irks the Japanese car-maker.

Senard promised Renault would block Nissan’s proposed governance changes that limited Renault’s influence on its operations. Nissan’s proposal would give it more influence on Renault’s board than vice-versa.

“I don’t find it natural,” Senard insisted. “I won’t be the chairman who will lead to further reduction of Renault’s role in the alliance.”

“We’re not asking for more than this. It’s not a reason to start a war,” Senard insisted.

Senard also slated the French government – the most influential of Renault’s shareholders – for kyboshing the €33 billion FCA merger before it even truly began last week.

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It became clear that Nissan’s Renault board members would abstain from voting for the FCA merger, which would kill it off, prompting the French government to ask for a five-day delay, which in turn prompted FCA to withdraw the merger offer.

“This project remains, in my head, absolutely remarkable and exceptional. Frankly, I am saddened,” Senard said.

Senard noted ironically that the French government derailed the merger, despite finance minister Bruno Le Maire suggesting Renault should approach FCA “a few months ago”.

The French government, which demanded Senard’s installation as Renault boss after Ghosn’s scandalous departure, insisted Nissan had to be on board for the FCA merger to go ahead, despite the Japanese company being a minority shareholder of Renault.

After Ghosn’s departure, the French government installed Senard as Renault boss

“It was the first time there was a chance to create a European champion at a time when people keep complaining that it doesn’t exist,” Senard said.

“With the exception of one vote against, all members of the board enthusiastically approved that opportunity. It just turned out that representative of the French government did not see eye to eye with us.

“This was a perfect example for France, for Renault and Europe to prove that we can do something together.”

“We were captivated by this project,” he said, adding that he didn’t know whether it can be revived in the future.

Nissan has a strong history but the future remains less clear

Le Maire hit back on French radio, saying the merger was interesting but that Renault had bigger problems to tackle – Nissan.

"It remains in interesting opportunity. But I have always been very clear: that it should be in the context of a strategy to reinforce the [Renault-Nissan] alliance," Le Maire said.

"As long as the French state is the main shareholder, its responsibility to the company, its employees, its factories and research centers is to fulfill its role with other shareholders in defining a strategy."

That defining strategy will take place without former boss Ghosn, who denies the financial charges that caused the downfall that brewed extreme mistrust between Renault and Nissan.

The mistrust has broken out from just Renault, though, with Nissan’s chief executive (and the architect of Ghosn’s demise) declared unfit for the position by two of the largest proxy voters for Nissan’s own shareholders.

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Renault holds 43 per cent of Nissan and is likely to vote for Hiroto Saikawa’s return as CEO of Nissan at its shareholders meeting on June 25, but others aren’t so sure.

Proxy voting service Institutional Shareholder Services (ISS) and Glass Lewis told the Financial Times that Saikawa was on “borrowed time”.

In a letter to investors, ISS insisted the CEO had been on the board too long (14 years) and was too close to Ghosn to be considered “totally unconnected from Mr Ghosn’s wrongdoing” and continued the imprisoned former boss’s “effective dictatorship”.

“In order to break from the past, the company needs to build a strong board with fresh members. Given the fact that Mr Saikawa has been on the board for 14 years, and worked closely with Mr Ghosn, Mr Saikawa’s appointment to the board is not considered appropriate,” the ISS letter said.

The letter noted that Mr Saikawa, who has not been charged by Japanese prosecutors, had signed off on Ghosn’s controversial retirement package -- just one example casting doubt over Nissan’s contention that Ghosn “is entirely wrong and Nissan is only a victim”, ISS wrote.

Glass Lewis took a different tack of criticism, insisting Saikawa should have taken tougher oversight steps to counter board-member misconduct and he couldn’t be trusted to improve its ethics.

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Written byMichael Taylor
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