| YOKOHAMA, Japan
YOKOHAMA, Japan Carlos Ghosn on Friday ruled out a merger between Renault and Nissan, the two auto giants he heads, but said he would review the capital structure of the partnership after pressure from investors in the struggling French car maker.
The issue of Renault's (RENA.PA) capital tied up in Nissan Motor (7201.T) has become a major talking point in the financial market, which was disappointed that Renault's six-year business plan, announced this month, lacked a more immediate catalyst to free up cash for the company's growth.
In an interview with Reuters at Nissan's headquarters in Yokohama, south of Tokyo, Ghosn professed to being surprised at the level of expectation for a structural change, saying the issue would be addressed, hopefully within three years.
"We will be reviewing the financial structure not to end up with a merger ... but to respond to the main concern of investors saying, 'Maybe you're using too much capital for your financial structure,'" Ghosn, the CEO of both Renault and Nissan, said.
"Hopefully it will come before (the halfway point of the Renault business plan through 2016)."
Investors have punished Renault shares since the February 10 announcement, with the stock falling almost 10 percent since then.
Some analysts were disappointed with the plan, saying the current alliance structure was inefficient and the companies would benefit from much closer business ties, including a merger.
After Ghosn's comments, Renault shares were trading up 1.4 percent in Paris.
He did not elaborate on the new structure, but some analysts have suggested an outright merger while others say a divestment of part of Renault's 43.4 percent stake in Nissan -- worth about $20 billion -- would make sense. Renault only needs one-third of Nissan to retain a controlling stake in it.
Nissan holds 15 percent of Renault, which has a total market capitalization of around $18 billion.
"You have to study all the consequences," Ghosn said, calling the market's dissatisfaction with the capital structure his biggest challenge.
"This is a very delicate balance between the two companies. You need something that makes all the shareholders happy, both at Renault and Nissan," he said.
(Editing by Lincoln Feast)